HOW TO MAKE MONEY TRADING FOREX

The main objective of the FOREX market is  to buy or sell currencies of the differrent countries.
Making a trade in the foreign exchange market is very simple: the mechanics of forex market are almost similar to those found in other markets (like the stock market), so if you have any experience in trading, you might be able to pick it up pretty quickly.






The object of FOREX trading is to exchange one currency for another in the expectation that the price will change, so that the currency you bought will increase in value compared to the one you sold.
Example:

Trader’s Action	EUR	USD
You purchase 10,000 euros at the EUR/USD exchange rate of 1.1800	+10,000	-11,800*
Two weeks later, you exchange your 10,000 euros back into U.S. dollar at the exchange rate of 1.2500	-10,000	+12,500**
You earn a profit of $700	0	+700

*EUR 10,000 x 1.18 = US $11,800
** EUR 10,000 x 1.25 = US $12,500

An exchange rate refers the ratio of one currency valued against another currency. For example, the USD/CHF exchange rate indicates how many U.S. dollars can be purchased by one Swiss franc, or how many Swiss francs you need to have a one U.S. dollar.

How to Read a FOREX Quote

All currencies are quoted in pairs, such as GBP/USD or USD/JPY. Those are quoted in pairs, because in every foreign exchange transaction, you are simultaneously buying one currency for selling another. Here is a real example of a foreign exchange rate for the British pound versus the U.S. dollar:

The first listed currency, sitting to the left of the slash (“/”) is known as the base currency (in this example, the British pound), while the second one on the right is called the counter or quote currency (in this example, the U.S. dollar).

Whenever you buy, the exchange rate tells you how much you have to pay in units of the quote currency to buy one unit of the base currency. In the circumstance of the above example, you need to pay 1.51258 U.S. dollars for 1 British pound.
Whenever you go to sell, the exchange rate tells you how many units of the quote currency you do get for selling one unit of the base currency. In the circumstance of the above example, you can get 1.51258 U.S. dollars for 1 British pound.
The base currency is the “basis” for the buy or the sell. If you buy EUR/USD this simply refers that you are buying the base currency and simultaneously selling the quote currency. In caveman talk, “buy EUR, sell USD.”
One will buy the pair only whenever the base currency appreciates (gain value) one relative to the quote currency. One will go to sell the pair whenever the base currency will depreciate (lose value) relative to the quote currency or one need to leave the country for long time or forever.

Long/Short

By observing the situation and market condition of certain currencies, you have to determine which currencies you will buy and which do you need to sell. Then you may come to the decision of a certain currency which do you want to whether buy or sell.
If you decide to buy (which actually means buy the base currency and sell the quote currency), you want the base currency to rise in value and then you would sell it back at a higher price. In trader’s talk, this is called “going long” or taking a “long position.” Just remember: long = buy.
If you need to sell (which actually means sell the base currency and buy the quote currency), you want the base currency to fall in value and then you would buy it back at a lower price. This is called “going short” or taking a “short position”. Just remember: short = sell.

“I’m long AND short.”

Bid/Ask

“How come I keep getting quoted with two prices?”

All FOREX quotes have two prices: the bid price and the ask price. For the most part, the bid price is lower than the ask price is.

The bid price is the price at which your broker is willing to buy the base currency in exchange for the quote currency. This means the bid is the best available price at which you (the trader) will sell to the market.
The ask price is the price at which your broker will sell the base currency in exchange for the quote currency. This means the ask price is the best available price at which you will buy from the market. Another word for ask is the offer price.

The difference between the bid and the ask price is popularly known as the spread.
On the EUR/USD quote above, the bid price is 1.34568 and the ask price is 1.34588. Look at how this broker makes it so easy for you to trade away your money.
If you want to sell EUR, you click “Sell” and you will sell euros at 1.34568. If you want to buy EUR, you click “Buy” and you will buy euros at 1.34588.

Now let’s take a look at some samples.