Learn Forex

A Simple Introduction To Trading Forex

You may have heard of forex trading due to the recent hype behind it. But what is forex trading? Can you actually make money from trading? This is a simple introduction to trading forex that will help address theses simple questions and more.

Forex, also called “FX”, is short for foreign exchange. The foreign exchange doesn’t get the big press like stocks, options, and commodities. But the foreign exchange is the biggest market in the world and it offers investors an incredible opportunity for profit.

When you trade on the foreign exchange, you are actually trading currency. You are buying one currency while selling another As the rate of exchange between the two currencies change, you either make or lose money.

Trading Forex is not investing within a single company or entity like stocks. With Forex, you’re investing in the economy of nation. You are betting that the overall economic health of one nation will improve in relation to that of a second nation.

Example Of A Forex Trade

You analyze the USD and see signs it is getting weaker. You also look at the Yen and realize it is getting stronger. Simple, you just sell the USD against the Yen right?

Not so simple though! Currency prices can be incredibly difficult to forecast because there are so many different factors that can contribute to a change in exchange rates. And you must remember that in currency trading you always trade in pairs. You buy one currency and sell another. So you can’t just look at one nation’s economy; you must look at two.

There are many different currencies to trade, however, here are the 7 main currencies available to trade in forex.

  • USD- United States Dollar
  • EUR- Euro
  • GBP- Great British Pound
  • JPY- Japanese Yen
  • CHF- Swiss Franc
  • AUD- Australian Dollar
  • CAD- Canadian Dollar

Now that you have completed this simple introduction to trading forex, try focusing on the 7 pairs above and learn as much about them as possible. The more you know about a currency pair and what makes it move, the better prepared you will be as a trader.

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