Forex for Dummies
Forex for Dummies is a brief introductory guide to Forex Trading.
Forex is the foreign exchange market, where you can trade foreign currencies. This market is the largest market in the world with in excess of $2 trillion of equity in the market on a daily basis.
With this volume of money being traded the opportunity to speculate on the rise and fall of various currencies is vast and many millions of dollars have been made speculating in this market.
The most common traded currency is the US Dollar, followed by the Japanese Yen, the Euro, the British Pound, the Swiss Franc, the Canadian Dollar and the Australian Dollar.
In order to make a trade on the Forex market you must buy one currency whilst selling another.
The idea is to buy currencies that you believe will increase in value relative to the one you are selling. If the currency you are buying increases in value, you must sell the other currency to close the position and take a profit. The first currency in the pair is called the base currency and the second is called the counter or quote currency. Usually the US currency is the base currency and quotes are given in $1 USD per counter currency, e.g. USD/JPY. The exceptions are the British Pound, the Euro and the Australian Dollar.
If you believe that the euro will strengthen against the dollar you'll want to buy euro now and sell it back later at a higher price.
As an example this is what a success trade on the Forex might look like.
| • You buy euro | We quote EURUSD at Bid 0.9875 and Ask 0.9878, which means that you can sell 1 euro for 0.9875 USD or buy 1 euro for 0.9878 USD.
In this example you buy euro 100,000, at the quote price of 0.9878 (ask price) per euro. |
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| • The market moves in your favor | Later the market turns in favour of the euro and the EURUSD is now quoted at Bid 0.9894 and Ask 0.9896. | |
| • Now you sell your euro and get the profit | You sell euro at a Bid price of 0.9894. | |
| • The profit is calculated as follows | Sell price-buy price x size of trade (0.9894 minus 0.9878) multiplied by 100.000 = USD 140 Profit (Note that the profit or loss is always expressed in the secondary currency) |
There are many tips and tricks that you will find throughout this site that have not been included in this Forex for Dummies page, indicators that if you understand them can help you earn a vast fortune. Forex for Dummies introductory page should only be considered the start of your journey.
You need to do you research before you start live trading as it is as easier to loose a fortune than make a fortune.
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Your will also need to register for a broker account so you can actually trade xxx is our recommendation
Spend some time and look around Forex for Dummies you will find a host of great articles and videos that should ensure you trade profitably. Feel free to add comments and suggestions.