You have finally decided to invest in the forex market. For that, you need to have a forex account, decide an initial amount to start with, do proper market analysis and decide which currency to go for. Too many things? You must have come across a forex quote and often get confused on how to interpret it. The terms involving buy sell forex confuse you even more.
Before you start investing, it is necessary that you acquaint yourself with all the required terms and understand what exactly are being bought and sold. Things may often get complicated, and you may end up losing money just because certain words were misinterpreted. Avoid such instances and get your queries regarding buy and sell forex answered here first.
How to read a forex quote?
All currencies in the forex market are quoted in pairs, simple reason being that when you buy a certain currency, simultaneously another currency is sold. You will come across a quote written as EUR/USD = 1.36. This is an example of the foreign exchange rate for Euros against US dollars.
The first currency or EUR is called the base currency and the second, which is the USD, is called the quote currency. When you decide to sell or buy forex, this sequence has to be kept in mind.
When to buy forex?
When you decide to buy a currency, Euro, in this case, the exchange rate states that for every Euro you buy, 1.36 USD has to be paid. In technical language, you have to pay in quote currency units in order to buy the base currency. So, pay USD 136 to buy 100 Euros.
When to make this purchase? You buy when your intuition says that the base currency will soar in price against the quote currency. In simple words, you have paid USD 136 and now have 100 Euros in your account. Say luck is on your side and the forex quote for the two currencies soared by 200 pips. It now stands at EUR/USD = 1.38.
If you sell the 100 Euros now, you will receive 138 USD instead of 136 USD that you had paid earlier. So, a profit of $2 is made. That comes to around 1.4% profit. It may seem small, but no one buys just 100 Euros. With the proper concept of buy and sell forex, profits may reach up to exceptional limits.
When to sell forex?
Similarly, you will receive 1.36 USD if you decide to sell 1 Euro. Selling forex involves speculating the market again. You sell your forex when the rate for your base currency has soared or fallen so that you can buy more at a lower price. Understanding when and how to sell forex can be tricky and requires proper intuition.
Now, you invest $136 or $136,000; profit percentage will remain same. Higher profits will require higher fluctuation in pips. Another way to gain more profit is the leverage concept. Here, with proper investment and margin selection, profit can be as high as 40%. The concept of buy sell forex remains same, though. Decode the forex market and build proper intuition to sell and buy in forex to reap huge profits.