The Foreign Exchange Market (also called Forex to shorten the name), as it is commonly referred to, is the largest and most liquid financial market in the world. The market is anchored by governments, speculators, central banks, Banking corporations, retail investors, and other financial institutions. It is estimated that nearly $4 trillion is traded daily in the global foreign exchange markets, making this several times larger than all of the US stock exchanges combined.
The value of one country’s currency is constantly changing against the value of another country’s currency. Forex traders make their money through buying and selling currency pairs, buying one currency while selling the other assuming that one currency price will increase as the other decreases. Since the Forex market operates 24 hours a day because world turns and some country goes night and other
country goes noon at the same time, and it has the largest online presence of any financial market, it is incredibly accessible to the average trader.
For example, in the United States the currency in circulation is called the US Dollar (USD) and in the Japan the currency in circulation is called the Yen (JPY). An example of a forex trade is to Sell the USD while simultaneously buying Yen. This is called going Short on theUSD/JPY.
You can earn money with this technique. Buy other countries money when they get lower, sell other countries money when they get higher. Changes can occur sometimes about any kind of economic waves and political changes.
You can make this technique for any country in the world. Because World currencies don’t have a fixed exchange rate. Money currencies anways fluctating depending on countrie’s inner and outer communication and political interaction.
Usually 4 money pairs goes importantly : EUR/USD, USD/JPY, GBP/USD, and USD/CHF.
How Does Forex Currency Trading Work?
Online Forex brokers offer their clients an easy way to access this market. When trading in Forex, most average investors use leverage provided by their broker to purchase large quantities of currency using much smaller amounts of capital. This allows the trader to target tiny fluctuations in currency prices which can result in huge profits on his minimal investment. Forex Brokers also gives you opportunity to multiply your money with 20x to 500x (Forex leverage) . So you can earn more. But be careful you can lost money fast in this forex world.
Forex leverage is works just like real leverage. I takes your power(money) and multiplies it with some number. Forex Leverage multipies your money with 20 to 500 times, this level depends on your forex broker company.
Some forex broker companies gives you leverage ability to 100 times. for example if you have 500$ and you want to buy foreign currency. when you used 100x leverage, your money becomes: 100x 500$ = 50000$ then you buy or sell some currency and make profit.
Downside of this technique is risk of lose money. If you lost money then your lose will multiplied with some number. Multiply number depends on what you want to buy or sell. forex company decides what number they can give you for your movement.
If you selling Japanese-Yen and Buying Us-Dollar. forex company looks your money(for ex.200$) and then looks the current position of US/YEN then gives you some leverage, maybe 150x times.
If you buying Canadian-Dollar and Selling Euro, and your money is around 800$ , then forex company decides to give you 350X times leverage multiplier.
Forex leverage depends on your stuation and current position of money.