How to Make Money from Forex

 

 

 

Forex is short-hand for foreign exchange which involves the exchange of the currencies used by different countries. One can make money from forex through the trading these currencies. The main objective of forex trading is to use one currency to buy another hoping that the value of the purchased currency will increase while the sold one depreciates. The mechanisms of how this works are very much similar to other financial trades like stock market. Here is a look at the details of how this can be done.
A Forex quote is always stated in pairs indicating two currencies and the exchange rate which shows the value of one currency against another. The two currencies are separated by a slash symbol with the one stated before the slash acting as the base currency while the one after the slash is the quote currency. The exchange rate tells how many quote currencies you get from selling one base unit. Buying a forex quote is done when base currency’s value is expected to appreciate while the pair is sold if the base currency is expected to depreciate in relation to the quote currency. Buying in this case means that one is buying the base currency while selling the quote currency whereas selling means that one is selling the base currency while buying the quote currency. The main aim is to buy when the quote is cheap and sell when the value accelerates. This way you are able to make a profit from the sales.
Who do you sell the currency quotes to? There are many brokers in forex trading just like all other financial trading ready to buy and sell. These can be contacted through online forex websites or in physical forex offices. They will offer a bid which is the price at which the broker is willing to buy the base currency and the ask or offer price which is the price at which the broker is willing to sell the base currency to you. When selling, any successful forex trader will look for the highest bid price among the many brokers and look for the lowest offer price when purchasing.
How do you ensure you make the most out of forex trading? In simple terms, if you think a country intends to lower the value of its currency to help its export industry grow, buy currency quotes with it as the quote currency. By doing so, you will have sold the quote currency because you know the value will depreciate in relation to the base currency. On the other hand, if you believe investors from a certain country will be pulling out from another, buy quotes with the country they are moving from as the base currency. This is because they will be converting their currency from that of the country they had invested in to that of their mother country. Buying quotes in the form investment country currency/country of origin would prove to be very profitable.