How forex works can seem a bit of a mystery to the inexperienced trader. I have traded stocks for a few years and only recently got into forex trading. I found at the start I barely knew what forex trading was let alone where to start making money from it. However all this changed when I discovered a tool that allowed me to get started and making money straight away with virtually no knowledge. More on this later in the article.
Forex trading is simply the buying and selling of foreign currencies. It differs from stock trading in that each trade has two components. For example if I buy some Euros, ejecting them to appreciate in value, I will by default be selling US dollars at the same time. This two way nature is great for the simple reason that unlike the equity markets the forex market cannot go on a downward trend. As one currency falls in price, another rises relative to it.
Prices i the forex market are quoted as spreads. For example you may see the Euro quoted as 0.6537 - 0.6540. These are the prices at which you can buy euros. In other words if you are buying Euros you will get 0.6537 Euros for every dollar and if you are selling you will get 1 dollar for every 0.6540 Euros you sell. The difference is between this buy and ell price is called the spread. Each 0.0001 increment is called a "pip".
I managed to get up and running trading before i really understood how forex works. I stumbled across a review of an automated trading software that does the hard work for you and automatically trades for you. I set this off an sat and watched and learned. I was and still am fascinated that I can sit and watch a computer make money. It basically executes large numbers small trades that aim to make tiny profits by predicting price movements based on historical trends. This is know as technical analysis.
Sitting and watching a tool like this has taught me so much and I am now starting to trade myself on top and scale up my investments in size to aim to get more profit.
| Here is a link to the forex trading article that got me up and running. |
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