The exchange rate between one currency and another is in constant movement and it is therefore possible to make profits by speculating on this exchange rate.
However it is also possible to make profits without having to actually hold the cash in hand. In fact, using the Forex, trading in foreign currencies has become as easy as child’s play.
Here we will explain how this works and how to make money on the foreign exchange market without having to be a stock market expert.
Firstly let us look at the market where foreign currencies are quoted. This is the foreign exchange market, better known as the Forex. On this market, the different foreign currencies are grouped in pairs, called ‘currency pairs’.
Each of these pairs shows a rate which actually corresponds to the exchange rate of the first currency converted into the second currency. This rate is expressed in pips. For example, the USD/JPY pair corresponds to the exchange rate of the U.S. Dollar compared to the Yen.
According to the value of each of the currencies of this pair, the rate will move either up or down.
Trading in foreign currencies is completed online, on a trading platform that is made available to investors by online brokers. On this platform you will be able to access all the rates of the major currency pairs in real time.
To trade in foreign currencies you simply need to take position in buying or selling a currency pair. A buying position means that you want the rate to rise whereas the opposite, a selling position, will be taken if you believe that the rate will drop. When your objective is attained, or when you consider your losses as too large, you simply close your position.
Your profit, or your loss, will be equivalent to the difference between the rate of the pair at the time you take position and the rate at the time your position is closed. You should also know that although this difference may not actually be particularly great you can use the leverage effect which enables you to multiply your profits by 100, 200, even 400 depending on the broker, thereby still making a comfortable profit.
If you want to start trading in foreign currencies online now, wait no longer, simply register with a reliable broker now and start taking positions on the currency pairs of your choice.