WHAT IS TRADING?
If you've ever traveled overseas, you've made a forex trade. You traded US dollas for German Marks, or Swiss Francs, or Japanese Yen. And depending on the value of each currency at the time of your trade, you either lost money or profited. For instance, If 1 Swiss Franc was equal to 1.25 US dollars, at the time you converted your US dollars, you made 25 cents for each US dollar, in the trade.
- All FOREX Trades involve two currencies.
- You are betting on the value of one currency against another.
- The EUR (Euro) and the USD (Dollar) are the most traded pair of currencies in the world.
- The first currency in the pair is referred to as the base.
- The second currency in the pair is referred to as counter..
- The difference in value between the base and the counter is referred to as the spread.
- When you click buy or sell, you are buying or selling the base, or first currency in the pair.
Let's say you think the euro will increase in value against the US dollar. Your pair is EUR/USD. Since the euro is first, and you think it will go up, you buy EUR/USD. If you think the euro will drop in value against the US dollar, you sell EUR/USD.
If the EUR/USD buy price is 0.70644 and the sell price is 0.70640, then the spread is 0.4 pips. If the trade moves in your favor (or against you), then, once you cover the spread, you could make a profit (or loss) on your trade.
In an atmosphere as dynamic as the forex, proper training is important. Whether you are a seasoned market veteran or brand-new to currency trading, being prepared is critical to producing consistent profits.
Of course, this is much easier said than done. To ensure that you have your best chance at forex success, it is imperative that your on-the-job training never stops. Developing solid trading habits, attending expert webinars and continuing your market education are a few ways to remain competitive in the fast-paced forex environment.
If your goal is to become a consistently profitable forex trader, then your education will never stop. As the old adage goes, practice makes perfect; while perfection is often elusive for active traders, being prepared for every session should be routine.
Trading the financial markets carries high risk and may not be suitable for all investors. Trading on margin and utilizing leverage can carry an even higher level of risk that can lead to a complete loss of investment funds. Before deciding to trade the financial markets, you should carefully and diligently consider your personal investment objectives, level of experience, and risk appetite. Because a possibility exists that you could potentially sustain significant loss, you should NOT invest or trade any capital that you cannot afford to lose. It is your responsibility to be aware of and understand all risks associated with trading the financial markets, and to seek professional advice from an independent certified financial advisor if you have any doubts.