In my previous articles, I’ve been discussing Foreign Exchange – the biggest trading market in the world, or any other trading market for that matter. For this post, let’s get back to the basics. Let’s talk about how this thriving market has been working recently, and for the past years since it has become popular.
Here are my previous posts about Forex:
The Largest Global Market, And The Risks Involved Therein
Sharpening Your Trading Skills: Understanding Candlestick Charts
Maybe the statements in the previous articles are still too vague, or maybe it’s too technical for you. Let’s break the explanations down in the simplest analysis possible. Here’s a simple example of basic foreign exchange activity:
Let’s say a certain company buys a bulk of products from another country. To make the purchase happen, the company owner needs to acquire some currency for that country first, just like when you go on vacations and holiday trips. The only notable difference is that the exchange of amounts that take place is just on a greater scale.
When that company goes through the process of exchanging those amounts, they contribute to changing the corresponding prices of those products as well as anything related to it.
When there are more people who actively use a form of currency, the demand for that currency also increases. When the demand decreases, so do the price of the products – it is one of the core concepts of business that everyone can understand easily. With all of these exchanges happening all over the world, the exchange rates constantly move.
Like in any market, the price of any currency is based on the laws of supply and demand. For instance, if there are more people or business entities who exchange Euros into Dollars, the price of the Dollar will rise in comparison to the price of the other, which will change the exchange rate.
Here’s a much simpler example that we can see every day so that we can clearly understand how anyone can benefit from foreign currency trades:
Let’s say a guy named Greggy lives in Europe and went on a vacation in the US. The guy would certainly bring some European cash with him, and will surely exchange it with some Dollars. During his stay in the US.
Now, let’s say Greggy exchanged his 1000 Euros into US currency with a rate of 2.8 Dollars for every Euro. He would get 1400 USD. Let’s assume he didn’t spend that money, and brought it back to his hometown in Europe, and have managed to keep the money until the exchange rate dropped to 2.8. Instead of getting back his original amount which is 1000, he would actually gain 77 Euros more, so he will now have a total of 1077 due to the lower value that the US Dollar got during that time.
He gained additional earnings just for holding on to a currency that he obtained from a foreign land. That is how Forex basically works – just the simple act of exchanging one form of currency to another, from a certain country to another country, and vice versa.
A trader or investor buys one form of currency, holds on to it for a while, waits for the rates to rise, and then makes the move to change his money back, increasing earnings along the way. When to do the exact act of trading is what makes Forex trading very tricky. It can be really hard if you are just starting out. But with careful analysis and repetitive investing, you will find it very easy over time.
Based on what you have understood so far, you might begin to think that traveling from one country to another can actually make you richer than you ever were. In that sense, you are correct… but expert traders would advise you against that. Unless of course if you really love to travel and visit different places.
Aside from the fact that traveling from country to country can be truly burdensome, it isn’t also very practical, especially with the current global health crisis we’re experiencing today. Thankfully though, there is a much easier alternative to trading foreign currencies – doing it with online means.
Today, many people are getting richer by the minute as they tap into the existence of internet entities called “Forex Brokers.” By working with such online businesses, you can take advantage of the rise and fall of foreign currencies right at the screen of your laptop, or even your phone.
Just like what that guy Greggy experienced as he traveled from Europe to the US, you can trade one currency into another and make your earnings significantly higher as you witness the fluctuations of currencies all over the world. Trading within the Forex market via the internet has lots of great advantages.
In addition to the convenience of doing it within the confines of your own home, you can also take advantage of the idea that Forex never sleeps. This means that you can do some trading activities at absolutely any time of your convenience, though you can just do it 5 days a week.
To participate in it, you don’t even have to procure a really huge budget. For the moment, you can just start with just as little as 10 USD. Some say it could be as low as 5. You can’t expect it to grow really big though. However, you can use that amount as some sort of “trading startup and practice” money.
To be truly successful with Forex Trading, you need to invest not only in a certain monetary amount but in a huge portion of your time as well. Success with money matters is not a walk in the park.
You need to learn, take risks, and improve on your methods and techniques. Rich people, as well as anyone who has attained success in all areas of life, attained their royalties because of patience and hard work. You as a Forex beginner should not be any different at all.
In the next posts, I will do my best to explain Forex to you in a much more comprehensive manner. Thanks for reading and Godspeed!
