In almost every country worldwide, you will probably see this huge market that is open 24 hours a day and seven days a week. The market that I am referring to is the Forex market. In here, you wouldn't be able to find the similar services, products and commodities that your local market offers. Instead, you'll find traders that are busy trading different currencies. Every trade that takes place in the Forex market involves two difference currencies. For instance, you want to buy US dollars using your Japanese Yen. Or, you would like to sell your Canadian dollars in exchange of Euros. The exchange rates and the value of currencies fluctuates everyday. In effect, traders should monitor these trends to determine the price of a certain currency.
In one day, a certain currency can change its value for a number of times without prior notice or warning. Hence, it is very vital to keep track of the trends. Political events and economic changes are huge contributors to the movement of the Forex market. To help you determine if you are losing or gaining in Forex trading, this article will be discussing important points you have to take nate of.
The Forex investment is greatly affected by the exchange rate and in order to understand the relationship between the two, you should also be familiar with Forex quotes. Like the currency pairs, Forex quotes can be found in pairs as well. Here is a very good example:
1.Suppose the currency pair is USD (US dollar) and CAD (Canadian dollar):
For this pair the Forex quote is USD/CAD=170.50. Another way to interpret this quote is by saying that 1 US doll is equivalent to 170.50 Canadian Dollars. The base currency is the currency found at the left side. This is always equivalent to 1. The currency on the right portion is called the counter currency. The currency with a higher value or the stronger one, is always positioned at the left side. In our example, the stronger one is the US dollar. In Forex quotes, the central currency is USD. Thus, you will find this in most Forex markets.
Now, I'll be giving you some tips to figure out if you are earning any profits or not.
2. In this example we will be making use of EUR to USD. Let's assume that the Forex rate is 1.0857. For this case, the USD is the weaker currency. Say, you bought 1,000 Euros, you have to pay $$1,085.70. After a few months or a year, you saw that the Forex rate is now up to 1.2083. Meaning, the Euro value has increased. Now, if you will be selling your Euros, you will be getting $1,208.30. You have gained or earned $122.60. On the other hand, if the Euro's value plummets down to 1.0576, the currency has weakened. Hence, if you sell it at that rate, you will only be getting 1,057.60, $28.10 less than of its price when you bought it. At this situation, you've lost.
Similar to mutual funds and stock, a lot of risks are involved in Forex trading. This is due to the fluctuating trends in the exchange market. Government bonds have low level risks but the returns that you could earn are much smaller. For you to rake-in higher returns, invest in Forex trading. However, you must be ready to face the consequences of its risks.
Set short and long term financial goals. In doing this you can minimize the risks involved in your financial security. Also, it will enable you to trade with confidence and comfort. Feel free to utilize available training tools. These aids can help you make wise and effective decisions. Now, you can check if you are gaining profits from Forex or not. - 23204
About the Author:
Improve your returns from Forex trading with the help of Fap Turbo. Before you buy online products, watch Damon Nelson's Fast Video Reviews at FastVideoReview.com.
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