The word ‘ FOREX ‘ is a contraction of two words called ‘ FOREIGN EXCHANGE ‘. It involves the trade of currencies. In FOREX trading , you are bound to speculate on the short or long term movement of a given currency pair. The idea is that ; you buy a currency at a lower rate and later sell it or exchange it when there is an appreciation.
If you have a currency pair such as British Pound () paired against the US Dollar ($) [ in shorthand GBP/USD ]. If the pair is currently trading at a value of 1.8025 , this means that there are currently 1.8025 US Dollars to the British Pound and is the exact value of the exchange rate .
Forex trading similar to the stock trading , but Forex is more lucrative than stock trading , if only you can study it properly before investing on it. Forex official website : www.forex.com , can give you a practice account to use for practice for 30days interval. This will make you learn it properly before you start your own investment .
During an average day of forex trading , exchange value can fluctuate between 70 and 200 pips. Pips simply refer to the number of lowest digit moves [ tricks ]. For example ; GBP/USD could start the day at 1.0825 and falls right back to 1.7850 , thus losing 175 pips over the day. This is why FOREX is considered the most liquid market.
As you can see , if you manage to call the next major move that the currentcy is going to make , then with a single mini lot trading just the GBP/USD pair you could earn up to 175 on this example trading day , or with a full lot you can earn up to 1,750 per day. Now, what if you trade several lots rather than just one , or trade several currency pairs rather than just GBP/USD ? As you can see , there is really big money to be made in FOREX.
Note that the market may sometimes move in a 70 pip range and then it doesn’t go straight from the lowest value to the highest or vice-versa , but tends to waver around all day ; up a bit , down a bit and so on . This is where you need to build your skills in technical analysis to ensure that you have an edge over someone who is purely gambling on the currency pair price direction at a given time.
FOREX is not a dangerous market to dabble with as those stock market veterans may tell you with a look of terror in their eyes it is actually the safest and most predictable market to trade in . It was back in those early years of Forex that you are considered qualified to trade if you have up to $500,000 to invest. Today you can trade Forex through a Forex broker and trade mini lots as you start for 1 or so. Most people now trade with as low as $100 depending on your financial strength.
In Forex , up to $1.9 trillion worth of currencies are traded daily. This is why you need to participate in your quota to be among earners. It is very advisable to study Forex system first before starting up so as not fall into a ditch. You need to know how to select a broker , place trade , learn forex acronyms and abbreviations , etc . To study on these I will recommend the following websites for you : www.forex.com , www.surefire-forex-trading.com/forex-trading-info.html , www.trendwaysfin.com/tuitorials.html , www.forexcentral.net/forex-tuitorials.