How to Make Money from Forex?

 

Want to know, ''How to Make Money from Forex?'' 

CPRON is here to assist you. Step by step guidelines presented by Sohel Adi.

 

In the Forex Market, you just buy or sell currencies.

“Placing a trade in the Foreign Exchange Market is simple.”

The mechanics of a trade are very similar to those found in other markets (i.e. the Stock Market), so if you have any experience in trading, you must be able to pick it up pretty quickly.

The main objective of forex trading is simply to exchange one currency for another in the expectation that the price will change, so that the currency you bought will increase in value compared to the one you sold.

For an example:

Trader’s Action	EUR	USD
You purchase 10,000 euros at the EUR/USD exchange rate of 1.1800	+10,000	-11,800*
Two weeks later, you exchange your reserved 10,000 Euros back into U.S. Dollar at the exchange rate of 1.2500	-10,000	+12,500**
You earn a profit of $700	0	+700

*EUR 10,000 x 1.18 = US $11,800

** EUR 10,000 x 1.25 = US $12,500

An exchange rate is simply the ratio of one currency valued against another currency. For an example, the USD/CHF exchange rate indicates how many U.S. Dollar can purchase 1 Swiss Franc, or how many Swiss Franc do you need to buy 1 U.S. dollar.

 

How to read a Forex Quote?

Currencies are always quoted in pairs, for instance GBP/USD or USD/JPY. The reason why they are quoted in pairs is because in every foreign exchange transaction, you are simultaneously buying one particular currency and selling another.

Here is a snapshot of a foreign exchange rate for GBP vs USD:

The first listed currency to the left of the slash (“/”) is known as the base currency (here, the British Pound), while the second one on the right is called the quote currency or counter (here, the U.S. Dollar).

When buying, the exchange rate tells you how much you have to pay in units of the quote currency to buy one unit of the base currency. In aforesaid example, you ought to pay 1.51258 U.S. Dollars to buy 1 British Pound.

When selling, the exchange rate tells you how many units of the quote currency you get for selling one unit of the base currency. In aforesaid example, you may receive 1.51258 U.S. Dollars when you sell 1 British Pound.

“The base currency is the basis for the buy or the sell.” 

If you buy EUR/USD, this simply means that you are buying the base currency and simultaneously selling the quote currency. In short, you are buying EUR and selling USD.

You would buy the pair only if you believe the base currency will appreciate (gain value) relative to the quote currency.

You would sell the pair only if you think the base currency will depreciate (lose value) relative to the quote currency.

 

Long/Short

“You should determine whether you want to buy or sell.”

If you want to buy (which actually means buy the base currency and sell the quote currency), that means you want the base currency to rise in value and then you would sell it back at a higher price. In traders' lingo, it is called “goinglong” or taking a “long position.” Just keep in your mind: long = buy.

If you want to sell (which actually means sell the base currency and buy the quote currency), that means you want the base currency to fall in value and then you would buy it back at a lower price. In traders' lingo, it is called “going short” or taking a “short position”. Just keep in your mind: short = sell.

Bid/Ask

“Getting quoted with two prices is obligatory”

All forex quotes are quoted with two prices: the bid and the ask. For the most part, the bid is lower than the ask price.

The bid is the price at which your broker is willing to buy the base currency in exchange for the quote currency. That means the bid is the best available price at which you (the trader) will sell to the market.

The ask is the price at which your broker will sell the base currency in exchange for the quote currency. That means the ask price is the best available price at which you will buy from the market. Another remark for ask is the offer price.

The differentiation between the bid and the ask price is popularly known as the spread.

On the EUR/USD quote above, the bid price is fixed at 1.34568 and the ask price is fixed at 1.34588.

Now simply think yourself, how the broker has made it so easy for you to trade away your money.

If you wish to sell EUR, you just click “Sell” and you will sell euros at exactly 1.34568; if you wish to buy EUR, you just click “Buy” and you will buy euros at exactly 1.34588.

Thanks for being with cpron.blogspot.com. To learn more keep an eye on Computer Professionals Network -a gateway to Outsourcing in Bangladesh.

Sohel Adi is founder of CPRON -a Dhaka based Outsourcing Agency that provides Websites, SEO, SMM and a full suite of digital services to small and medium scale of businesses. CPRON also provides e-training for Business Owners, Executives and Students. CPRON offers Custom Training to Companies/Agencies around the GLOBE (preferably Bangladesh) on SEO, Content Strategy and other Digital Marketing disciplines.

          You may find Sohel Adi on Facebook, Pinterest, Twitter, Google+ and Linkedin.