Forex Trading - Another Way to Earn Profits Using Your Wits

tasty money (Photo courtesy by oskay from Flickr)

Introduction to Forex

What is forex?
The term ‘forex' is a nickname for Foreign Exchange market. The forex market is the largest market in the world because it has a volume of over $4 trillion a day; while the New York Stock Exchange only has $25 billion. A 10-digit figure is very big, indeed. Other names for this giant include: FX, FOREX, Retail forex, Spot FX or Spot.
Because the foreign exchange market is actually a cash market backed by large banks from all over the world, different foreign currencies are involved in the forex trading. Theoretically, the fx trade is a ‘spread' - where one must sell a currency to buy another.

Euros and US Dollars. (Photo courtesy by Kiva.Dang from Flickr)

FX market, like the stock market, is basically involved in trading. It is a continuous process of buying and selling currencies. Its main objective is to exchange one currency for another-with the expectation that the price of the currency bought will gain value that is higher than the currency sold.
Here's an example of earning profits thru buying euros:

• First, purchase 10,000 euros at exchange rate of 1.18 for EUR/USD
• After 2 weeks, exchange 10,000 euros back to US dollars at exchange rate 1.2500 to earn $700

How to Make Money in Foreign Currencies

Exchange Rates from Newspaper. (Photo courtesy by Kiran Kumar PY Pilly from Flickr)

What is an exchange rate? This term refers to the ratio of one currency valued against another currency.
Example: USD/CHF - indicates how many US dollars needed to purchase 1 Swiss franc, or vice versa.

Scalping in Forex Trade

There are a lot of things to learn about forex trading - but here are the initial important stuff to study:

• Reading FX quote
• Base currency
• Long and short (long means buy; short means sell)
• Bid and ask
• Spread
• Margin trading
• Demo trading
• Fibonacci
• Candlesticks
• Charts
• Indicators

However, you must not plunge into fx trading without undergoing a demo trade for at least 6 months. Combine the hands-on practice with studying everything about forex thru reading online information. One good site for beginners in forex is the Babypips' School of Pipsology.
DO NOT trade with a live account without making sure that you already have all necessary skills to trade successfully.
A successful trader has honed these 3 abilities:

• Make pips
• Keep pips
• Repeat making and keeping pips

Learn the basics of forex trading. (Photo courtesy by ssufian from Flickr)

Always REMEMBER, you shall be putting your hard-earned money at stake whenever you trade in the fx market-so be smart and patient. Never be greedy. This is one of the golden rules of forex trading.