Why Trade Forex?
Trading the Forex market is a great way to get a steady income and even, for a select few, build huge wealth that will ensure your retirement goals and financial freedom. The currency exchange rate fluctuates, and by forecasting the direction the currencies are likely to move you have the opportunity to make money trading the volatile Global Forex market.
If you buy Euro and sell the US dollar, you’re anticipating that the Euro will rise against the US dollar. This means that need to buy a number of units of Euros for your US dollars, and if your forecast proves correct and the Euro does increase in value you then can make a profit once you close the transaction.
However, if your forecast is proven wrong and the EUR/USD exchange rate falls you’ll lose money.
The Forex exchange market provides us with endless opportunities because the currency exchange rates never stop fluctuating. The forex market is open 24 hours a day, five days a week from Monday morning Australia time until Friday afternoon in the USA.
Note: The main advantage of having a high liquidy market is that it makes it easy to buy and sell currencies. There are always buyers and sellers as long as the market is open.
The Forex market is easily influenced by the world economic news and the geopolitical events than this volatility creates lots of short-term trading opportunities. There is no reason not to give Forex trading a try as you really don’t need need a background in economics to make money trading Forex.
Going Long and Short
Going long and going short is just another way of saying buying or selling something. In simple terms, you can only make money trading Forex if you buy low and sell high.
A Long position is what we most commonly associate with investing and it involves the buying of a currency pair. When going long, the expectation is that the currency exchange rate will rise and the currency we bought will appreciate in value.
A long position is more suitable in an uptrend (Bullish) markets. This means we’re looking for buying opportunities where the currency exchange rate will increase over time.
A Short position involves the selling of a currency pair, with the expectation that the currency’s exchange rate we sold, will fall and the currency we sold will depreciate in value – a.k.a. devaluation.
A short position is more suitable in a downtrend (Bearish) markets. This means we’re looking for selling opportunities where the currency exchange rate will decrease over time.
Note: With a long position you only profit when the currency’s exchange rate will rise, while with a short position you only profit when the currency exchange rate falls.
The greater the rallies and the sell-off in the currency exchange rate the greater the profit will be.
Choosing a Forex Broker
If you want to be able to profit from the Forex market, you need a Forex broker. A Forex broker will act as a middleman between you and the interbank market. In exchange for a fee or a commission, it will give you access to the Forex market. These commission fees and a number of other factors distinguish brokers from each other.
Through these brokers, you will be able to buy and sell in the Forex market. To trade, you need a Forex Broker that will match all your orders through a trading platform. The Forex broker market is highly competitive and you have a wide range of Forex brokers from where to choose.
The most appealing part about Forex trading is that you can basically trade the markets anytime during the day. In Forex trading, besides the broker, there are no other middlemen. So, you are close to the market. You as a trader have the freedom to execute your trade online without the need to go through a central exchange.
In order to profit and start making money, you need a Forex broker to access the global foreign exchange market and buy if you believe the currency exchange rate of a currency pair will rise or sell if you believe the currency exchange rate of a currency pair will fall. Doing the analysis, and understand what makes the currency pairs change value is what traders need to do to make more and more profitable trades.