Currency exchange is a type of trading activity taking place daily on an international scale. Governments do it, entrepreneurs do it and normal people do it. Understanding currency exchange is the key when it comes to understanding how to start on Forex.
How to trade of Forex?
Trading on FX takes place via computer networks, in electronic form, between all traders around the world. This is the main reason why the FX market is the most liquid market in the world, the most accessible market in the world and why it is also considered the most dangerous market in the world.
As in other markets, the currency must be priced in a different currency, which is why currency pairs were created. Earning on currency exchange reviews involves exchanging one currency for another and benefiting from a change in the exchange rate.
How to play on such dynamic market?
FX Trading involves buying or selling one currency for another. The game on the Forex market is associated with speculative transactions.
When buying the base currency for the currency quoted we earn, for example, from the appreciation of the euro and the depreciation of USD. The sale of the base currency (EUR) and the purchase of a quoted currency (USD) is associated with earning a drop in the EUR / USD rate. In short, earning in the Forex market is similar to a normal business transaction. We want to buy cheaply and sell it at a high price, or sell it cheaply and buy it even more cheaply. How to play Forex? Now you know that it is not difficult. But remember, you have a lot of learning and working on your own psyche if you want to comprehensively understand how to start playing Forex. It is important to know Forex brokers also.
Investing on FX using the Carry trade method means earning a difference in the interest rates of two currencies. Carry trade distinguishes two types of transactions:
- Purchase of the base currency (currency on the left side of the currency pair), where the interest rates are san and higher than the quoted currency.
- The sale of a base currency with a lower interest rate and the purchase of a quoted currency with a higher interest rate. In conclusion, a trader using a carry trade earns a difference in interest rates. Every night his deposit is increased by the Swap.
The game on the currency exchange market offers a large profit / risk ratio
When you become more familiar with the currency market, you will realize it is probably one of the most exciting assets on the market. Trading game offers a higher potential rate of return than other assets. In addition, the availability of leverage increases our potential profits and potential losses.
You can achieve profit in the market in a downward and upward trend
As we have already mentioned, the best strategy is to follow the long-term trend. In contrast to the stock market, the market easily derives profits from the falling market as well as from the up market. This is one of the biggest advantages of this market. During the downtrend, when prices fall, we can make money by selling the base currency.