Profiting from trading in the foreign exchange market is one of the most important things people search for in the modern era
To profit from the difference in commissions from one country to another.
Investors can trade almost any currency in the world through foreign exchange (Forex), in order to make money
In Forex, you should be aware that you are risking speculation, basically, you are betting that one's worth
Currencies will increase relative to another currency, the expected return of currency trading is similar to the money market and less than stocks
Or bonds, however, it is possible to increase returns and risks by using leverage. Currency trading is considered
Generally speaking, it is more profitable for active traders than passive investors.
Explanation of profit from trading (buying and selling currency)
It is important to note that currencies are traded and quoted in pairs, for example, you may have seen a price
Currency of the EUR / USD pair of 1.1256, the base currency in this example is the Euro.
The US dollar is the quote currency.
In all currency quotes, the base currency equals one unit, the quote currency is the amount of the currency
That one unit of the base currency can buy, based on our previous example, all this means that the euro can
One purchase of $ 1.1256, an investor can make money in Forex by appreciating the value of the listed currency or by depreciating the base currency.
- How do you earn money trading?
Another view of currency trading comes from looking at the position that the investor takes on each currency pair.
The base currency can be considered as a short position because you are "selling" the base currency to buy the listed currency. In contrast, the quote currency can be considered as a long position on the currency pair.
In our example above, we see that one euro can buy 1.1256 dollars and vice versa, to buy one euro,
The investor must first sell the US dollar to buy on the euro, to make money from this investment,
The investor will have to resell the euro when it appreciates in relation to the US dollar.
For example, suppose the value of the euro rose to $ 1.1266, on a lot of 100,000 euros, an investor would get $ 100 ($ 112,660 - $ 112,560) if he sold the euro at the exchange rate.
In contrast, if the EUR / USD exchange rate drops from 1.1256 USD to 1.1246 USD, the investor will lose 100 USD (112.460 USD - 112.560 USD).
- Advantages for Active Traders
The currency market is heaven for active traders, the Forex market is often the most liquid market in the world
Commissions are zero, spreads close to zero, spreads close to
One common pip in some currency pairs, it is possible to trade foreign currencies frequently without high transaction costs.
With Forex, there is always a bull market somewhere. It guarantees the long-term nature of Forex, and the diversity of currencies
Global, and the low or even negative correlation of many currencies with the stock markets are steady opportunities for trading, are not
There is a need to sit on the sidelines for years during bear markets.
- Disadvantages for passive investors
Passive investors rarely make money in the Forex market, the number one reason is because of the returns on currency holdings
Foreign exchange passively low, similar to the money market, if you think about it, it makes sense, when American investors buy euros in the forex market, they really invest in the money market in the European Union, money markets around the world generally have low expected returns, and so does the Forex.
The benefits of the forex market for active traders are usually useless or even harmful to passive investors.Low trading costs mean very little if you do not trade much. Using high leverage without a stop loss order can result in large losses. On the other hand, the use of orders The stop loss turns an investor into an active trader.
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