What Is Forex Trading And Is It Right For Me?

There are very few investors who have consistently made massive fortunes over a while. Jim Simmons, a quiet recluse, has been successful with smaller frequent trades in his Medallion fund.

What Is Forex Trading? Forex trading refers to the foreign exchange markets where investors and traders worldwide buy and sell one currency for another.

You might have even participated in forex trading without even realizing it. Anytime I visit a foreign country, I exchange my U.S. dollars for the local currency based on the prevailing exchange rate.

Currency Pairs Traders frequently trade currencies by selling one currency and buying another.

Forex Trading Terminology

Forex trading always involves the exchange of currencies in pairs. You could have a EUR/USD pair for U.S. dollars and Euros. You can have similar pairs against the Japanese Yen or the Australian Dollar.

Forex Quotes The EUR/USD is the currency pair, and the price is 1.2209. The price indicates that for every Euro you sell, you could buy 1.2209 USD. The 52 week range indicates that in the last year, the price has fluctuated from 1.07 to 1.22. You make a profit when you sell a currency for more than what you paid for.

PIP You might have noticed the forex quote has four places to the right of the decimal. The smallest price change that a given exchange rate can make is the pip. Most currency pairs, except Japanese yen pairs, are quoted to four decimal places.

Can You Get Rich By Trading Forex? Forex investors make money by deciding what currencies will rise and fall. Some traders swear by technical analysis and others will rely on fundamental analysis.

Traders believe they know what direction the currency would move based on the latest news. The challenge with making money trading is that the same information is also available to everyone else, including professional investors.

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