Ultimate Beginners Introduction to “Forex” part 2
So how do you make money off it?
The best bit! with Forex markets, it is always possible to make money. Unlike stock markets, housing markets and all the other markets that can, as we have recently seen, crash, on Forex markets if one currency is going down against another, you can be making profit. The entire market cant crash, because is based on what currencies are worth compared to other currencies, so when one is going down, its the same as another going up.
How does that work?
Well, lets say you had 100 US dollars(US$100) and you thought the dollar was going to go down against the euro, so you bought euros with your dollars. If the exchange rate between dollars and euros was 0.75 you would get 75 euro cents per dollar. So now you have €75. Now just say you were right! The dollar went down! This would mean the the exchange rate would go down, lets say to .65, meaning one dollar was worth 65 euro cents. This is great news for you, because you bought euros, so if you swapped back your €75 to US dollars you would now have US$115.38. All you have done is move your money from one currency to another and back, and you have made a profit.
Thats it? sounds easy
It literally is that easy, there are a few things to take into account, such as commission you must pay to your broker(choose your broker carefully!) and something called “pip spread” which will be explained in the next edition of this guide, but there you have the basics.
In the next part, as well as talking about pip spreads, I’ll introduce you to the tool which can really crank up your profits on forex markets, margins. Margins are what make forex trading the exciting money making venture that it is, so stay tuned!
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