Forex market is simply like all other markets where people trade with currencies instead of goods and foods. Anybody can trade and earn from these markets. But, this is just possible to reach throughout mediators that call brokers. Brokers act as your helping hand in forex trading and provide you easy access to the desired market. But you should have sound knowledge on how to make money forex trading online.
Available currencies of these markets usually trade in pairs, such as the Euro & US dollar. When you like to buy Dollars for Euros, you’ll have to open the USD/EUR trade and click “Buy.” Likewise, if you want to purchase Euros for Dollars, open EUR/USD and click “Buy.”
Similarly, when you want to sale them, do the same thing and click on the “Sell” option. This is very simple; you just need to keep in mind that you always refer to the first currency of the said pair. Let’s know more about how to earn in forex trading.
How to Understand a Forex Quote?
You already know currencies usually trade in pairs. It’s because you’re concurrently purchasing one currency, but selling another one. As a forex trader, you do it for all foreign exchange transactions. Let’s make it easy to understand using an example for British Pound and the US dollar.
The currency left with a slash symbol “/” is the ‘base’ currency while the British Pound is the base currency in the example. In the pair of two currencies, another one is ‘counter’ or ‘quote’ currency. In the example, the US dollar is a counter or quote currency.
While buying the quote currency, you’ll see an exchange rate that tells you how much you should pay to buy one against the base currency. That means you’ll have to pay US$11,800 if you want to buy EUR 10,000 when the exchange rate is 1.18 of one US dollar against one Euro.
In any case, you want to buy or sell your currency, the base one will be the ‘Basis’ for you. So, when you like to buy EUR/USD, it indicates that you’ll buy the base currency and sell the quote currency.
First off, you have to decide what you’re going to do; buying or selling. If you like to buy, you have to raise the value of the base currency. And then sell it when you get a higher rate. This calls “Going Long” in trader talk. You have to keep in mind that “Long = Buy”.
When you have to sell, you like the fall of the value of the base currency. So, it’ll be profitable to buy back when you can get it at a low price. It calls “Going Short” in trader talk and just keeps in mind “Short = Sell”.
How to Forecast in Forex Trading
Supply plus demand dominates over the currency rate. It may change depending on the country’s economic situations. The situations include the GDP of the country along with inflation, the labor market, etc.
Moreover, you can forecast by judging the political, social, and economic phenomena of the country. This is a major factor while doing Forex trading is to learn how these things work.