Interested in forex trading? Here are some points to consider

By: john ssmith

There are people who trade in shares and commodities and make excellent money out of it. But if you thought share traders make great amounts of money then look at those that trade in foreign exchange, popularly known as forex. Forex trading is done by some of the most intelligent investors in the world and it would be an understatement to say that they do awfully well for themselves.

What is forex trading? To put it simply forex is the exchange of global decentralized trading of the various international currencies. When you see that the value of pound has devalued or increased in value against the Euro you should know that it is the foreign exchange market that determines the rise or fall of the pound.

To give you an example – let us say you spend £100 and you could buy €121. Now what will happen when the value of Euro appreciates and £1 becomes equal to €1.19? If you now sell your Euros you will get more than £100. So, essentially you make money on this transaction. On the other hand if the value of Euro depreciates then you make less pounds than what you spent by selling €121. This is what happens in the forex market. Like the share market it is also a market of speculation. People speculate that the value of a specific currency will move with respect to another currency and this bases their buying or selling decision.

In forex the two currencies that are traded are called currency pairs. Taking the example above, GBP is the base currency and Euro is the quote currency. Why does the currency value fluctuate like this? This happens because of the global buyers and sellers and their perceived value of certain currencies. Forex trading often determines how healthy the economy of a country is. When the European economic crisis was in full swing many people bought Euros by spending dollars. When the market picked up they sold back the Euros and made money from the transactions.

Global economics is closely associated with currency fluctuations. When the economy of one country is in great health and the economy of another country is in poor health it is natural for the former country to buy more goods from the latter country but not the other way round. When an expert forex trader decides to choose which currency to buy and which currency to sell they take into account economics. Foreign exchange trading is not about riding your luck. It is about using scientific speculations to decide on how you want to trade in currencies.

It is not possible for everyone to understand economics that well so that they can effortlessly deal in forex. This is why forex trading experts are so required. In the UK there are experienced foreign exchange brokers that just need your money to play with. They can earn handsomely for you. But of course, even the best trader can speculate wrong at times and hence, you shouldn’t expect a profit all the time.

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Those that do well in forex trading can earn scores of money. However, an experienced forex broker is probably required to get the best returns.

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