In order to trade Forex online yourself we have to start at the core fundamentals. Forex trading involves the exchange of a nation's currency for that of another at a mutually agreed rate. Basically, it involves trading foreign exchange on a margin.
You have the option to buy or sell a certain currency, if you live in the United States your US Dollars will be converted to the foreign exchange price of the currency you're interested in trading for.
For example, you can buy a certain amount of US dollars at a certain price and exchange them for Euros at a price higher than you had bought your dollars thus making some profit in the process. On top of that you can also make money by selling certain currencies for a lower price than what other's bought that currency for. See below for a more detailed example in order to effectively learn to trade Forex online yourself.
Each Currency you are trading is placed into pairs such as EUR/USD or GBP/JPY
The First Currency in the pair is the base currency and the second currency in the pair is the counter (sometimes the quote) currency.
When you enter a BUY Trade, there is an exchange rate that tells you how much of the counter currency you have to pay in order to buy one unit of the base currency.
For Example: EUR (Base)/USD (Counter) = 1.2742, this means I will have to pay $1.2742 in US Dollars in order to purchase one Euro Dollar.
When you enter a SELL Trade, the exchange rate tells you the amount of counter currency you will receive for each unit of the base currency you decide to sell.
For Example: GBP (Base)/JPY (Counter) = 1.674, this means I can sell the British Pound in exchange for $1.674 in Japanese Yen. To successfully trade Forex online yourself you have to clearly understand this concept.
- Usually the rates are placed in four digit increments, 1.2389. The only exception is the Japanese Yen which uses only three digit increments, 98.342.
- The fourth digit after the decimal point is called the "pip". Example: 1.2356. If the pip increases or decreases, the value for a particular currency is affected.
For all new Forex traders generally, when the pip either increases or decreases the value of that investment is effected in $10 increments. If the third digit after the decimal point increases or decreases than the trade is affected by $100 increments (Example: 1.234 to 1.235). If the second value after the decimal point increases than the trade is affected by $1000 increments (Example: 1.23 to 1.24). When you first start to trade Forex online yourself these increments are important, however if you choose to increase your leverage/margins with your online broker these increments could be much higher. Either way this could be a loss or a profit, all depending on how you choose to strategize your trades.
When you decide to trade Forex it's fundamental to understand that there are different margins at which you can choose to invest in when you open a broker account. The increased/decreased increments don't always have to start off at $10. Your margins could be higher if you have more money to invest giving you $100 or $1000 every time that pip increases or decreases depending on how you choose to buy or sell your currencies.
The foreign exchange rates fluctuate on a daily basis. A key fact to live by if you trade Forex online yourself is to study up on world events, economics, politics, financial matters and natural disasters because these can all be contributing factors in determining whether the value of a currency for a particular country is going to either increase or decrease.
Understanding how the Forex market operates is just the beginning. In order to use this volatile system to create a consistent profit you need to implement certain strategies while utilizing the right resources to conduct diligent practice and VITAL analyses. Learn more here http://beanentrepreneurtoday.com/trade-forex-online-yourself-fundamentals/
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