This is one of the most frequently asked questions in the forex market. There have been a lot of stories about how traders made so much money in the past and how people are still making money currently. There have also been stories of how many invested in the forex market and lost out so frustratingly that they think the forex market is a scam. As true as all these may sound, you are the only one in the best position to tell if you can make money from the forex market or not. First, you need to understand what the business is all about, and what is expected of every one in it.
WHAT IS FOREX TRADING?
Forex trading is the exchange of currencies from one currency to another over the counter (OTC) at an agreed exchange rate. Here is an illustration; Mr A wants to exchange some euros for some US dollars. This mean he has to find someone who owns some dollars and wants to exchange them for some euros. Mr A comes in contact with Mr B (who has some dollars and wants to exchange them for some euros) they agree on an exchange rate, carry out the transaction; end of business. This is typically what forex trading is all about.
THE CORE OF FOREX TRADING
Why will someone want to change money from one currency to another (that is indulging in forex trading)? One can trade forex in any of the following cases
Traveling to another currency that deals with a different currency
Business transactions with a foreign country involving the exportation and importation of goods/services
Making profits from exchange rate fluctuations
When you travel to another country, it is necessary that you change what foreign currency you have to their local currency so you can deal with them financially. Also, when you want to buy goods from another country (importation), you will have to pay them in their currency. So you will have to change your local currency to theirs in order to pay for the goods. When you want to make profits from the exchange rate, you are not traveling to another country, selling, or buying goods. That is the sort of currency exchange that has a lot of people buzzing. All you have to do is sell a currency when you think its price will depreciate and then buy it back after the price has fallen. This way, you get to make some profits. On the other hand, you only buy a currency when you think the price is about to appreciate, and sell it after the price has appreciated to make some profits.
There is more to forex trading that what we have here, but this is just a brief overview of what it is all about. From this overview, you can tell that with proper information, skills, and preparation, anyone can trade the forex market and make money from it.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.