If you’ve found your way to this article, you’ve probably already come across the
term ‘forex’ and are curious to see what opportunities it might hold in store for
you. Consider this your starting point. Your very first step towards becoming a
forex trader. And what better place to start than with the basics?
WHAT IS FOREX TRADING?
Forex trading is process of exchanging one currency for another. This happens for
many reasons. For example, holidaymakers might need to exchange currencies if
they plan to travel abroad, and companies might need to exchange currencies if
they plan to do business internationally. For many people though, forex trading is
about buying and selling currencies for the simple purpose of making money.
IS TRADING FOREX PROFITABLE?
Making a profit in forex is a matter of picking the right trades. Traders are
constantly watching the markets and trying to decide the best time to buy or sell.
They invest a lot of time learning how to trade and how to improve their
strategies. They also spend a lot of time tracking prices, monitoring charts, and
carrying out market analysis. This helps them to implement well-thought-out
trading plans and hopefully trade profitably.
WHY DO PEOPLE TRADE FOREX?
People trade forex for many reasons, but the end goal is always the same – they
want to make money. What makes forex a good market to trade? Well, firstly it’s
the biggest and probably the most active. This means that you’re not going to get
stuck with an investment you can’t later sell.
It’s also quite a volatile market and prices tend to go up and down a lot. This is
good because means there will be plenty of opportunities to trade. Beyond that,
the Forex market is also a good place to start because it’s open most of the time
and you can easily fit your trading around your other commitments.
WHAT IS THE FOREX MARKET?
The forex market is one of the largest and most actively traded global financial
markets with a daily volume of over $5 trillion. While the term ‘ forex market’
might give the impression that all the trades happen in one place, this is far from
true. There is no centralized exchange, and prices are determined purely by supply
and demand. Accessing the market is easy, all you need is an internet connection
and an online trading account. As long as you’ve got that, you can trade anywhere.
THE HISTORY OF FOREX TRADING
The idea of forex trading is far from new. In the last century alone, there have been
three major developments in the way currencies are valued and exchanged
internationally. Pre-World War II, there was the Gold Standard method which saw
value of international currencies linked to the value of gold. Post-World War II,
there was the Bretton Woods method which saw international currencies valued
against the US Dollar. And then in 1971, the Bretton agreement was abandoned,
paving way for the free-floating exchange rate system now in place.
HOW THE FOREX MARKET WORKS
In the modern-day forex market, currencies are traded in pairs and the rates are
no longer fixed. This means that the value of a currency changes in relation to the
currency it is paired with. For example, at the time of writing this article, 100 USD
was worth 98.04 EUR. Under this system, the market has enjoyed exponential
growth. This, in combination with technological advancements, has meant that
nearly anyone can now trade forex.
With the right knowledge and support, forex trading can be a way to earn more
income. Want to learn more? Join our free Telegram channel for more educational
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