Using Over-The-Counter Market To Buy Stocks Is An Example Of Make Money Trading Currencies – What Are the Basic Tricks?

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Make Money Trading Currencies – What Are the Basic Tricks?

The Forex market is where investors can make money by trading currencies. The foreign exchange market functions on the same principle as the stock market. For those who already have stock trading experience, trading Forex will be a very similar experience.

By understanding how the Forex market works and some basic Forex trading techniques, you can easily make money trading currencies. Buying and selling currency pairs is the main transaction that takes place in the Forex market. One currency is exchanged for another. If the value of the purchased currency increases compared to the sold one, a profit is made. Some important terminology used in the Forex market includes exchange rate, Forex quote and long/short.

To make money trading currencies, the first step is to get used to the jargon used in currency trading. The exchange rate is nothing but the ratio of the value of one currency to the value of another currency. Two currencies are called a currency pair.

For example, the USD/GBP exchange rate can be read as how many US dollars it takes to buy one British pound or how many British pounds it takes to buy one US dollar. In order to make money from currency trading, it would be useful to understand this with an example. GBP/USD = 1.25 is a typical Forex quote. In this case, the first currency is called the base currency. The second currency is known as the quote currency or counter currency.

When an investor buys a currency, the exchange rate shows how many units of the quoted currency are needed to buy one unit of the base currency. In the example above, an investor needs US$1.25 to buy one UK pound. The exchange rate when selling is interpreted a little differently – that is, how many units of the quoted currency can be purchased by selling one unit of the base currency. In the example above, a Forex trader can make $1.25 by selling one British pound.

The base currency is the main factor that decides whether an investor buys or sells. To make money trading currency, you need to make a decision to buy or sell. For this, the long/short position must be analyzed. To buy, the value of the base currency must rise (long position), and to sell, the value of the base currency must fall (short position).

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