What Is Forex Trading And How Does It Work?

This has been a topic I have been interested in for a while now. From watching the news with my parents growing up, I often wondered what all those letters and arrows meant when the finance segment of the bulletin started. I later learned that these were indicators to show the different values of each important currencies against each other. if they were increasing or decreasing in value.

Fast forward to a few years later, I started hearing the team Forex Trading. of course, I had absolutely no clue what this meant. I just surmised it worked somewhat like the Stock Exchange. I wasn’t too far off, but this article will hopefully clear things up for you a bit more…

What is Forex Trading?

I always like to start by defining the terms in question. I feel breaking them down helps to understand them better.

  • Trading – This is the action in which an item is exchanged for another. We can trade an infinitive number of things. These include but are not limited to stocks, cryptocurrencies,  and even goods and services.
  • Forex – This is an abbreviation for Foreign exchange and refers to the barter of currencies on the financial markets.

With that said, let me give you a scenario you have probably experienced that can help you visualise this more vividly.

When you travel to another country, you likely have to exchange your home currency to the currency of your destination or places you will be visiting. It can be from dollars to pounds, euros, francs, or whatever the locals trade in exchange for goods and services.

That exchange is a Forex (foreign currency exchange) Transaction.

Therefore, Forex trading is buying or selling one currency against its value to another.  It is speculating on the value of one currency against another. For example, making educated guess weather the GBP (Great British Pound) will decrease or increase in value against the USD (United States Dollar) with the aim of being correct and making money (profit).

Here are the most commonly traded currencies and their abbreviations:

GBP: United Kingdom Pound.

USD: United States Dollar.

EUR: Euro Zone Euro.

JPY: Japanese Yen.

CAD: Canadian Dollar.

CHF: Switzerland Franc.

AUD: Australian Dollar.

There are many others of course, but these are the most widely traded currencies on the Forex Market.

Forex trading is thus a method of investing. It is a gamble, yes, but what business isn’t?

How Does Forex Trading Work?

Now that you have an understanding of what Forex trading is, we’ll get into how you can trade on the Forex market.  There are a two main of ways Forex Trading can be done and these are:

Do it Yourself Method:

Nowadays, anyone with a computer and access to the internet can start trading Forex due to the technological advances in the past years. The accessibility has attracted many enthusiastic novice traders and participation in the market is higher than ever before!

Whilst the market is easy to access, the dynamics of the markets and trading can be quite complex. If you are considering joining the Fx trade market, I strongly recommend that you get familiar with the basics of trading at least

Forex trading works the same way as any other asset trading you buy low and sell high. And as long as the price is growing, that’s easy. The downward markets, however, are much more interesting.

In order to trade on a downward trend, you need to short-sell assets. Short selling means borrowing some assets from a third party, selling them, buying them back later and returning the borrowed amount. If the price lowers between selling and buying, you will make money.

The Forex is very ruthless, especially if you are a beginner and using leverage. You need to know what you are doing and not just rely on luck and intuition. Luckily, there is a fantastic  Forex trading academy called Cash FX where you can earn as you learn.

Forex trading is a skill and one that could generate you a source of income but its not without its risks, you can make money but you can also lose money.

There is a vast number of individual traders that are working a 9-5 job and using there free time to make extra income with Fx Trading.  It is not just for the wealthy or those with all the time in the world. regular people like you and I are also making life changing money with it.

The Method of Using a Broker:

Finding someone willing to give a loan as an individual trader is beyond difficult. You need either an Extraordinary amount of money or some contacts in the industry. That’s why the majority of individual traders are using a broker who provides them with shorting capacities, leverage and cheaper access to the Forex network.

When searching for a broker, consider the following:

  • Reputation – Manipulating reviews online is easy, but if your broker has a lot of negative reviews that’s something to remember. Also, keep an eye on the way they respond to those reviews and whether or not they are solving the problems.
  • Age – A lot of new broker companies are either scams or are going through growing pains. And while it may not seem fair to them, you don’t need those issues in your life. Check when your broker was registered and do not join inexperienced ones.
  • Registration – The European Union and the United States have tight regulations for Forex brokers and make sure that they do not scam their traders. Other countries do not provide such warranties. So check where your broker is registered and make sure that it’s not something like St. Vincent or Madagascar. If it is, make sure that like JustForex, they have an EU license too ( JustForex review Once you have a broker, you are set use the manuals on their website to deposit money and download MetaTrader 4, and start trading on Forex.

The process:

If you are interested in learning more about trading I suggest you check out the Cash FX Program.

Just like any other skill, forex trading can be learned and if you are interested in learning more (which is highly recommended before making any sort of financial decisions) you should consider taking a forex trading course. An in-depth trading education course can help you start on the path to mindful and informed forex trading.

Conclusion.

Forex trading is not “Rocket Science.” Although it truly feels like it is, especially in the beginning! It is very profitable, but difficult and involves a lot of risks. to minimize those risks and maintain profits, you will need to study a lot. This is a skill set that not easy to acquire, but when its there… the results are phenomenal! The forex market is the most liquid market in the world with an average daily trading volume of $5 trillion. So, if you feel up to the challenge, Forex trading is an amazing opportunity and a fantastic starter into the asset markets. I hope this has shade some light on what you once felt was a dark road.

2 thoughts on “What Is Forex Trading And How Does It Work?”

  1. Pingback: What is CashFX and how does it work? - Entrepreneur Nikki

  2. Pingback: Forex Trading in 2021 - Entrepreneur Nikki

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