What is FOREX trading and how does it work?

Discussion in 'Articles & Tutorials' started by ciacia8, Jan 13, 2013.

  1. ciacia8

    ciacia8
    uix_expand uix_collapse
    New Member

    Joined:
    Jan 13, 2013
    Messages:
    1
    Likes Received:
    0
    Have you ever seen banners for FOREX trading while you were surfing the internet? I think everyone sees these kinds of advertisements all the time. So what is” FOREX”? And how does it work? FOREX stands for Foreign Exchange, so it’s all about buying and selling currencies online. But how does it make profit in a short time?
    FOREX trading is the fastest way to make money and it’s also a very high risk investment because if you don’t know how to trade safely and smartly you will lose all your money.

    Imagine you would like to buy a new laptop and sell it at a higher price you should then go to a shop and buy the laptop. Let’s say that the laptop cost 1000 $ but you just have 10 $ on your pocket so you will not be able to buy it. You felt upset but the seller said to you: give me that money you have and you can sell the laptop at any price you want and you should then give me 990$ later. Sounds great isn’t it? the seller will keep the laptop and you should try to find someone to buy it for a higher price. After while you finally sell it for 1200$ so you go to the main seller and give him 990$ and take the laptop. The result is that you earned 200$.
    You would think it’s easy enough but how about if the laptop price decrease to 995$? in this case you can wait for the price to increase again or you can sell it with this price but you will then lose 5$ and the seller shouldn’t lose anything. If the price continue decreasing and level off at 985$ and you sell the laptop for this price that is mean you lost your money (10$) and the main seller also lost 5$ but as I said above the main seller shouldn’t lose anything.
    For this case, the main seller will ask you to pay 15$ as a deposit. The amount will divided into 2 categories, 10$ is called used margin and 5$ called available margin. So when the price fall to 990$ you will have a choice whether you sell the laptop or wait for the price to increase and it is the same if the price decrease to 986$ because the available margin still covering the loss. However, when the price decrease to 985$ the main seller will ask you to deposit more money or sell the laptop immediately and if you don’t do that the main seller will sell it without your permission.
    This is what’s happening in FOREX, brokers used what is called in investment “Financial Leverage”. By using this, your money will double many times up to 500 times with some brokers (1:500). So if you invest 1000$ in FOREX and buy (EUR/USD) pair ” EUR/USD means to by Euros by pay a certain amount of dollars” and the financial leverage is (1:200) that’s mean you invest 200,000$ because the money will be given to you by broker. So when the currency price rise you will earn a large amount of money that you will never earn if you don’t use the financial leverage and just invest 1000$. However, if the currency price falls you will lose a large amount of money as well because the system will sell the currency automatically if the available margin doesn’t cover the loss. This is the reasons why the brokers always warn of risk investment using financial leverage.
    FOREX trading is not as easy as some brokers will tell you and you have to learn about the technical analysis to make right predictions about currencies prices as in the stock exchange market.
    What makes this market special from stock exchange market is the impact on the prices can be made by the politics and also the trading between countries while in the stock exchange market the impact could be made by major investors. And another special thing is that you can make profit even if the currencies prices will decrease so how that happens?
    If you predict that the currency price will fall you will not buy this currency for sure but you can sell it and buy it again with the lower price to make profit from the difference between the two prices. But how could you sell the currency if you don’t own it? The answer is very easy the broker will lend you that currency to sell it and when the price rises you should buy it again. So in this case the broker will take the same amount that they lend it to you and you earn money. But if your prediction was wrong and the currency price increase so you will buy the currency again with a higher price and you will lose money and if the price continue increasing the system will buy the currency automatically if the available margin doesn’t cover the loss. So it’s the same idea for buying and selling currencies.
    In conclusion, you should never invest in FOREX if you don’t know how to analyze the market or you can find a company to give you an accurate signal. But be careful because there are a lot of fake brokers so you should ask about the broker in the internet first and read what others said about it. And remember never invest a large amount of money unless you are on a safe side because of the high risk in FOREX.

    Source: http://e-bus.org/2012/12/what-is-for...-does-it-work/
     
    #1 ciacia8, Jan 13, 2013
    Last edited by a moderator: Jan 18, 2013
  2. Jerlene

    Jerlene
    uix_expand uix_collapse
    Active Member

    Joined:
    Feb 3, 2011
    Messages:
    1,415
    Likes Received:
    176
    The foreign exchange market (forex, FX, or currency market) is a form of exchange for the global decentralized trading of international currencies. All it is is you trade one currency for another.
     
  3. daytrader

    daytrader
    uix_expand uix_collapse
    Active Member

    Joined:
    Jul 29, 2009
    Messages:
    1,678
    Likes Received:
    216
    If you have visited anothe country and exchanged your bills to their own currency, you basiclaly have participated in FOREX without using the (mt4) software. but this depend to which country and whether you gained or not. :D
     
  4. e-bus.org

    e-bus.org
    uix_expand uix_collapse
    New Member

    Joined:
    Dec 29, 2012
    Messages:
    17
    Likes Received:
    6
  5. Fergal

    Fergal
    uix_expand uix_collapse
    Premium Member
    Premium Member

    Joined:
    Nov 18, 2007
    Messages:
    10,575
    Likes Received:
    1,165
    e-bus.org I've added your link as the source in the first post. If you would like any of that content removed, please send me a PM to let me know.
     
  6. Robin Williams

    Robin Williams
    uix_expand uix_collapse
    Member

    Joined:
    Nov 28, 2012
    Messages:
    50
    Likes Received:
    4
    Forex Trading is trading currencies from different countries against each other. Forex is acronym of Foreign Exchange.Forex Trading is trading currencies from different countries against each other. Forex is acronym of Foreign Exchange.
    Forex trading is typically done through a broker or market maker. As a forex trader you can choose a currency pair that you expect to change in value and place a trade accordingly. For example, if you had purchased 1,000 Euros in January of 2005, it would have cost you around $1,200 USD. Throughout 2005 the Euro’s value vs. the U.S. Dollar value increased. At the end of the year 1,000 Euros was worth $1,300 U.S. Dollars. If you had chosen to end your trade at that point, you would have a $100 gain. Forex trades can be placed through a broker or market maker. Orders can be placed with just a few clicks and the broker then passes the order along to a partner in the Interbank Market to fill your position. When you close your trade, the broker closes the position on the Interbank Market and credits your account with the loss or gain. This can all happen literally within a few seconds.
     
  7. e-bus.org

    e-bus.org
    uix_expand uix_collapse
    New Member

    Joined:
    Dec 29, 2012
    Messages:
    17
    Likes Received:
    6
    Thanks a lot :)
     
    • Like Like x 1
  8. scifi

    scifi
    uix_expand uix_collapse
    Member

    Joined:
    Nov 2, 2008
    Messages:
    1,207
    Likes Received:
    44
    In simple words FOREX is FOReign + EXchange. a form of trading where you can change currencies with other currencies according to their values and price against each other....

    Not all the currencies in the world have same value ...eg- a Mc Donal Burger can be 2$ in USA but 20Rs in India..So you can deduce that 2$=20 Rs if you are going to buy a mc donald burger...

    NOw another situation Eg.-- You have 2$ which have current value of 20Rs and I give you Rs and take $ from you.
    Now after some time due to inflation or economic policy of my country Rs gain a little bit agst $ and new exchange rate is 2$=18Rs.
    So if now I will give you $ back, you have to give me only 18Rs instead 20Rs which I gave you earlier and 2Rs is your Profit or Gain...

    Samething applies Vice Versa too...
     
  9. forex legend

    forex legend
    uix_expand uix_collapse
    New Member

    Joined:
    Feb 28, 2013
    Messages:
    18
    Likes Received:
    2
    Forex online is a great bussiness opportunity today bro

    Nowadays we can start trading forex with really low startup capital forexample $1
     
  10. daytrader

    daytrader
    uix_expand uix_collapse
    Active Member

    Joined:
    Jul 29, 2009
    Messages:
    1,678
    Likes Received:
    216
    I don't think one will have success in trading with just $1 though. I have tried the marketiva once with $5 and its a complete failure not just due to the pip spread fee. I get to have better chance with $200 with oanda. Which broker dyou recommend for newbies with just $100?
     
  11. forex legend

    forex legend
    uix_expand uix_collapse
    New Member

    Joined:
    Feb 28, 2013
    Messages:
    18
    Likes Received:
    2
    There is a lot of broker thats offer micro account todays pals

    FXOpen, insta, roboforex, master forex, lite forex etc thats suitable for a beginner trader

    but if we want to trade more seriously we should open an ECN account..
     
  12. daytrader

    daytrader
    uix_expand uix_collapse
    Active Member

    Joined:
    Jul 29, 2009
    Messages:
    1,678
    Likes Received:
    216
    Not too serious about trading. I kept forgetting that I did long at GBP/USD at period of time and later I saw I'm lossing, I forgot to exit the trade because I go out to smoke.

    I don't regularly trade though. I've been with different brokers and it always frustrating to see how they rip traders off.. I just hope we as traders can use the fresh installed and not modified MT4(5) software from these brokers.
     
  13. forex legend

    forex legend
    uix_expand uix_collapse
    New Member

    Joined:
    Feb 28, 2013
    Messages:
    18
    Likes Received:
    2
    At the beginning I trade use scalping strategy using M5 timeframe, so i must sit in the front of my computer every minutes but now i change my trading become intraday (only 1 order /day) so i can spent my time to do another activity
     
  14. GTOptions

    GTOptions
    uix_expand uix_collapse
    New Member

    Joined:
    Mar 1, 2013
    Messages:
    1
    Likes Received:
    0
    Forex trading mainly refers to exchanging of currency pair like EUR/USD, GBP/JYP etc. means EURO is traded against US Dollar.
     
  15. daytrader

    daytrader
    uix_expand uix_collapse
    Active Member

    Joined:
    Jul 29, 2009
    Messages:
    1,678
    Likes Received:
    216
    Everyone has their trading strategy but I get to find tuts in babypips that worked great using an hour timeframe. It did work for me from time to time. How much pips have you bet the highest? I usually exit when I reach 30+ although theres a chance that it will go up. Its just to make sure. And when i tried to chase, i end up losing :D
     
  16. forex legend

    forex legend
    uix_expand uix_collapse
    New Member

    Joined:
    Feb 28, 2013
    Messages:
    18
    Likes Received:
    2
    depend on what pair thats we trade bro, if we trade on eur/usd we can get 30 pips/day easily..
    and pair like gbp/jpy will give us more chance to get more profit because this pair is really volatile
     
  17. daytrader

    daytrader
    uix_expand uix_collapse
    Active Member

    Joined:
    Jul 29, 2009
    Messages:
    1,678
    Likes Received:
    216
    I do trade in just two pair. gbp/usd and eur/usd.
    its the exit strategy that is hard to learn really and I still do fail from time to time. any tip?
     
  18. forex legend

    forex legend
    uix_expand uix_collapse
    New Member

    Joined:
    Feb 28, 2013
    Messages:
    18
    Likes Received:
    2
    may be you can use fibonacci or pivot point as exit strategy pals,
    espicially pivot point i heard this method used by a lot event by big bank in financial world
     
  19. daytrader

    daytrader
    uix_expand uix_collapse
    Active Member

    Joined:
    Jul 29, 2009
    Messages:
    1,678
    Likes Received:
    216
    I'm using fibo from time to time to measure the retracements but then since I'm comfortable using the RSI i stick to it for now because of the trading system I found to be working with the level of my understanding. I do hope I learn to use pivot point indicator to improve though. Any particular system you've tried taht worked for you?
     

Share This Page