About Forex trading
If you ever travelled to another country, you probably had to exchange your money for another currency. In this case, you have already been involved in forex trading. The word "forex" is short for "foreign exchange". It is also called "FX" and currency exchange.
About Forex trading in two words
As you understand, trading in Forex is a little more than just a holiday currency exchange. Companies use different currencies to buy goods in other countries. To purchase these products, they must first get their local currency, just like we do when we go on vacation. The only difference is that these companies exchange money in massive amounts.
With currencies being exchanged around the world, exchange rates are always changing. That's how it works.
Currency trading is like exchanging money on vacation
When currencies are exchanged, each has a specific price: the exchange rate. As with any other commodity, the amount of money is subject to the law of supply and demand.
If there is a high demand for a particular currency - for example, many people or companies will want to exchange their money for the euro - the value of the euro will rise, and the exchange rate for other currencies will change. You can use this principle and make a profit. For example, let's think about a vacation trip.
Say, you live in Europe and go on vacation to the United States. You have to exchange the euro for US dollars. When you trade, you get $1.40 for one euro. You change €500, so you get $700.
Two weeks later, you go home, but you have $250 left. If you don't need the dollars anymore, you exchange them back for the euro.
You notice that the price of the euro to the dollar has changed - now the exchange rate is $1.30 per euro, so you get about €190. If the exchange rate remained at $1.40, you would only get €180. This way, you get a profit.
A successful trade is to use the exchange rate to make a profit.
Here is an even more precise way to explain this principle using the same example:
Say you exchanged your €500 for US dollars and got $700, but you didn't spend a single dollar and came back with $700 in your wallet. After changing the exchange rate from $1.40 to $1.30, you get €538.5 back instead of €500. And you earned €38.5 just by keeping your money in dollars while the exchange rate changed. This is how you trade in the foreign exchange market. We buy a certain amount of currency, hold it until the exchange rate changes, and then exchange it back at the changed rate, making a profit from the transaction.
Trade that suits your lifestyle
Using a currency exchange bureau to slightly replenish your budget with the currency leftover from your holiday is not the most practical way to trade Forex. Fortunately, there is a more natural way to do this: through online currency exchange institutions called "brokers".
This means that you can exchange currencies online and earn money through continually changing exchange rates. As in the case of a holiday trip, you can buy different currencies and profit from changing exchange rates between currencies - this is Forex trading.
Online Forex trading has many advantages:
You can make transactions from your home or any other place with an internet connection.
Forex never sleeps. It works 24/7 and can fit your life rhythm.
You do not need to have a lot of money to start trading. You only need to have $150 to trade and gradually increase your account size.
Trading at Forex will not make you productive overnight but can provide you with a steady income, along with your regular work. It can even become your business, depending on how much time you are willing to invest in it.
Of course, you will have to make some effort to do this, but that is exactly what trading is all about - helping you learn to trade to the extent that suits your lifestyle and help you find your way in the Forex market.