Forex is perhaps the most volatile market today, up one second and sliding down the next. Although this might translate to excessive risks, the upside is that you also have the chance to earn well by using tried and tested methods for Forex use.
As a beginner, it’s understandable that you are having doubts about how to proceed. In this article, you’ll find out some of the most common aspects of Forex trading.
Currency Pairs
Currency pairs refer to the two different currencies ‘matched’ together in the market. Pairs may vary and as a trader, what you’ll watch out for are the changes in the pairs with respect to each other’s values. Today, there are several major currencies interchangeably paired with each other. What you have to watch out for are the following:
• Japan
• Canada
• Germany
• France
• Spain
• Italy
• United States
• Switzerland
• United Kingdom
• Australia
• New Zealand
How It Works
So how does this currency pair work and how do you earn money through Forex? The currency pairs basically denote how you’re buying one currency and selling off another. For example, you’ve got the EUR and USD pair with a quote of 1.5000. This basically means that for every 1 EURO, you’ll need 1.5 US dollars.
So what happens is that the proceeds from one currency are used to purchase a different currency. The difference between the two therefore translates to your income or revenue.
Remember that the above is the simplest explanation for what is going on in the Forex market. Since you’ll be dealing with different currencies of various countries, it makes sense that all of these will pass through the official banks of said countries. Every time you sell currencies, you’ll be paying an interest rate on them but buying currencies also means that you’ll be earning an interest rate.
Movement of the Market
Forex is dubbed volatile for a good reason – the price of currency pairs may change from day to day or even from one hour to the next. There are so many factors to consider as these currencies move up and down the market. According to statistics, the changes in currencies may be less than 1 percent in a day – but that 1 percent can be the difference between a loss and a gain.
This is why Forex traders rely on so many tools to help them make the right decisions, buy the right currencies, and sell notes before they hit a spiral. Tools include chart analysis, fundamental analysis, and various other items often provided in Forex platforms.
Of course, that’s just a small part of how the Forex market works. The fact is that if you want to be successful in Forex, you’ll have to constantly update and learn new information about the market.