What is ForexTrading
Benefits of Forex Trading
What are Forex Markets?
And how you can earn money with Forex Trade?
So Let us first understand what is Forex Trading?
In simple terms, Forex Trading is buying and selling of currencies.
Exchange rate of a currency changes all the time and Forex traders try to capitalise these fluctuations.
They buy a currency at a lower rate and sell it at a higher exchange rate.
In India, Rupee is generally evaluated against US Dollar.
So, how can you benefit from Exchange rate? Let’s suppose you are travelling abroad and you need 100 Dollars. And the Rupee dollar exchange rate at that time is Rs. 70.
So you will have to pay Rs. 7000 to get 100 US Dollars.
But you decide to wait for some time before buying dollars. In a week’s time, exchange rate declines to Rs. 69. So now, you will have to pay Rs. 6900 to buy 100 US Dollars.A Benefit of Rs 100.
In a similar manner, forex traders capitalise on currency fluctuations on a much larger scale.
Magnifying the profits, but also considerably increasing the risk.
Forex Markets
The Forex Market is the market in which participants can buy, sell, exchange, and speculate on currencies.
The currency and foreign exchange market is considered to be the largest financial market, its daily turnover surpassing that of the futures and equity markets combined.
Benefits of Forex Trading
There are many benefits that you can reap from forex trading. But to monetise the benefits of forex trading, you need to have a very good knowledge of the industry and global Economy in general.
Here are some of the Benefits of Forex trading:
1.High Liquidity
Forex is a highly liquid market mainly because of its sheer size. The currency market is considered to be the largest financial market with over US $5 trillion in daily transactions, which is more than the futures and equity markets combined. You can never get “stuck” in a trade.
2.24-Hour Market From the Monday morning opening in Australia to the afternoon close in New York, the forex market never sleeps. You can choose the hours that you want to work in.
3.No fixed lot size In spot forex, you determine your own lot size. This helps traders to participate with small account as per their convenience.
How you can earn money with Forex Trade?
First of all, what you need to keep in mind is that, forex trading is not a shortcut to getting rich quickly.
Forex trading requires a lot of understanding and patience.
Foreign exchange rates are dependent on alot of Market and Economic Factors such as Exports, Imports, Crude Oil Prices, Market Drivers, etc.
Let us understand how you can make money in Forex trading.Suppose, due to some economic variables,you expect the rupee to depreciate. That is, you think the Rupee will lose some value against US Dollar and buying US Dollar will become costlier.
Assuming, the US Dollar is trading at Rs. 70.In two months, this price is expected to move to Rs. 72. A trader can buy 1000 US Dollars at Rs. 70.Now Total cost of the transaction will be Rs. 70,000.
After two months, the price of US Dollar moves to Rs. 72. When he goes out into the market and sells those 1000 US Dollars, he will be earning Rs, 72,000. A profit of Rs. 2,000.
But do not make a mistake of assuming that forex trading is as simple as explained in the example.The trading goes much deeper involving the application of several techniques like Forex
That's it for today.
Thanks for Reading
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