What is forex trading?

Forex trading is the buying and selling of  countries currencies or money.  As simple as that. If you are new to forex trading, we will direct you and take you through the simple steps on how to trade forex. Like we said forex trading is buying one currency while selling the other.

Buying a country’s currency is like investing into that country’s stock and to do that you first change your local currency to that particular country’s currency.

In case you haven’t done this before, you have at least heard of exchange rates, or maybe of exchange bureaus on radios and  Tvs, or read it in newspapers and may be on boards pinned by exchange bureaus and banks in our cities.

Bureaus and banks always display these different exchange rates for different currencies on their boards for their clients.

If you want to keep your pounds in  US dollars, you go to the bank or an exchange bureau and buy a dollar on that exchange rate and if you have dollars and you need pounds, you do the same and sell dollars as you buy pounds at the given exchange rate.

This for example applies when you want to visit a foreign country and you have to change your currency into that of the country you intend to visit  by buying it and on your coming back you sell it back to your own local currency.When you do that you have participated in the forex market. This is because you have exchanged one currency for another.

Forex simply means currency trading. You sell one currency as you buy the other(trade money).

Like any other market or trade, forex trading involves both the buyer and the seller.The only difference is that while in the daily market there is always the physical exchange of goods or services, this is not the case when it comes to forex trading.

Forex trading is done through a broker on the over the counter market. There is no direct contact between the seller and the buyer.

Here you trade money/currency as your product.

The currency is traded in a pair because for the transaction to be complete you have to buy one currency as you sell the other and the profit is attached on the currencies interest rate differentials and your kind of prediction.

So how to trade in forex market is just simple; for instance if you choose to buy let’s say US dollar, you are predicting that the US economy is doing well and will continue to strengthen for sometime due to your analysis compared to the counter currency you are selling.

 

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