How do you make money trading forex?

In the forex market, you buy and sell currencies just like in the stock market.

Currencies are usually paired. e.g. AUD/USD. So if you buy this pair, you are expecting the Australian Dollar to go up and the American Dollar to go down simultaneously.

For example, say you buy 10,000 AUD at the AUD/USD with an exchange rate of 0.70.

In other words, every AUD is worth 0.70 USD.

3 Weeks later the price jumps to 0.79.

Therefore,

*AUD 10,000 x 0.70 = USD $7000

**AUD 10,000 x 0.79 = USD $7900

Thus earning you a net profit of USD $900.

Now, that’s how you make money trading forex.

Cha Chhhiiinnngggggggggggggg !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!


Now let’s learn to read a forex quote

As mentioned earlier, currencies are always quoted in pairs like AUD/USD, EUR/JPY, and like the one shown in the picture above, EUR/USD.

Here, EUR or EURO is the base currency and USD is the quote currency. In layman’s terms, for 1 Euro you will get 1.4745 USD.

Thus, the base currency is the basis for the buy or the sell. Pretty simple huh!

For further explanation, make sure you refer to the video in this post.


Time for some Forex Lingo

  • Long: If you decide to buy a currency pair, (you are buying the base currency and selling the quote currency), in traders talk, it is referred to as, “going long” or taking a “long position“. Therefore, BUY = LONG.
  • Short: If you decide to sell a currency pair,(you are selling the base currency and buying the quote currency), in traders talk, it is referred to as, “going short” or taking a “short position“. Therefore, SELL = SHORT.
  • Bid: The bid price is the price a forex trader is willing to sell a currency pair for. In general, the bid price is lower than the Ask price. In other words, the bid is the price at which your broker is willing to buy the base currency in exchange for the quote currency.
  • Ask: The ask price is the price a trader will buy a currency pair at. In other words, the ask price is the price at which your broker will sell the base currency in exchange for the quote currency.
  • Spread: The difference between the bid and the ask price is called the SPREAD.
An illustration that covers everything we’ve discussed in this article

Please follow our Youtube Channel for detailed video content.


Forex Trading – A Beginner’s Guide

Forex or Foreign Exchange is the process of changing one currency into another for various reasons, trading, tourism, commerce, etc. If you have ever traveled to another country, you would usually see a currency exchange booth at the airport and most likely you might even have exchanged some of your currency into the visiting country’s native currency, you have essentially participated in foreign exchange.

To put simply, you have exchanged one currency into another.

Say you are an Australian visiting India. Say you got 50 INR for 1 AUD. Damn, you just became 50 times richer.

On your way back, you decided to convert your unspent rupees back to AUD but now you only got 47 rupees for 1 AUD.

What is this sorcery !!! I just got ripped off.

Relax, the only thing happened here is that the exchange rates have changed.

And due to these exchange rates, it has allowed traders to make money out of it. Humans are opportunists!

The forex or Foreign Exchange, in a more formal way, is the largest financial market in the world!

YES, THE LARGEST!

Lets put a few things in perspective:

The NYSE or the New York Stock Exchange trades around $23 billion per day in volume.

Compared to that, the forex market trades around $5.1 TRILLION per day in volume.

THAT’S A TRILLION!

FYI. A trillion is 1000 Billion.

In the American system one billion is 1,000,000,000 and a trillion is 1,000,000,000,000 so one trillion is one thousand times one billion. In the British system one billion is 1,000,000,000,000 and one trillion is 1,000,000,000,000,000,000 so one trillion is one million times one billion.

Looks like our little NYSE monster just saw his big daddy!

Check out the graph below for average daily trading volume for the forex market and various stock exchanges.

The forex market is open 24×5 and only closes down on the weekend. So, unlike the stocks and the bonds markets, the forex market does not close at the end of the day.

Each forex trading day is divided into sessions. There are primarily 5 forex trading sessions:

  • Frankfurt
  • London
  • New York
  • Sydney
  • Tokyo

Here is a visual representation:

Here is tool to help you convert the timezones according to your local time. Told you, we got your back 🙂

Click here!

Forex trading is no doubt one of the best ways to make money online. However, there are a few things that you need to understand before putting any of your hard-earned money in.

  1. It is not a get rich quick scheme.
  2. It is a business just like any other business.
  3. And similar to any other business, it takes time to learn and make money off it.
  4. It requires a great deal of education and an even greater mindset to make it a successful business.

So what all is required to trade forex:


Education

Do you know the number one reason why more than 90% of forex traders don’t make money? Coz they ignore the most important ingredient of the mix, which is, you guessed it:

EDUCATION

Before you jump in with both feet and lose all your hard-earned money and then give up quickly and blame Donald Trump for your failure. So here are a few sources to get you started:

  • To start your forex education journey, look no further. We have a range of articles, blogs, youtube videos to guide you through your entire forex career. Here is a short video to get you started.

Be sure to check out our other blogs and subscribe to our Youtube Channel for your complete forex education and start making that moolah !!!!


 Regulated Forex Broker

Do not fall trap to any random broker. In this cut-throat world, the competition is fierce which leads to great services but also leads some brokers to go down the dodgy route. It may come as no surprise that many forex brokers follow unethical practices. Therefore, be very careful and selective when picking up a broker to start your forex career.

To help you not get caught in all the research mumbo jumbo here is a great forex broker that we recommend, regulated by ASIC.