What is Forex?
The forex or foreign exchange market is where currencies of different countries are traded on a over-the-counter (OTC) or decentralized market. The Forex market is the world’s most liquid market that is open for five days straight during the weekdays and closed on the weekends. As of 2020, the average daily trading value of the forex market is estimated to be around $6.6 trillion. The forex market has various participants, including corporations, central banks, asset management firms, retail traders, foreign exchange remittance companies, etc. The US dollar is the main currency traded in the foreign exchange market and accounts for around 88% of the total forex transactions globally. Euro is the second-most traded currency in the forex market, followed by the Japanese yen.
How Does Forex Work?
Forex trading is the act through which one currency is changed into another. When trading forex, you are always trading in currency pairs, which means selling one currency while simultaneously buying another currency or vice versa. The exchange rate of currency pairs is determined by the market forces in the foreign exchange market. The currency pairs are mostly traded on online trading platforms provided by different online brokers, where you can simply register for an account and start trading and investing.
How can you make money from forex?
Forex trading can be a profitable business, if you do it with proper education after learning all the different aspects and elements of trading. Various opportunities and key elements exist which you can learn and apply in your trading strategy to earn money in the forex market. Listed below are some ways which traders use to make money in the forex market.
1- Technical Analysis:
Technical analysis involves reading price charts and analyzing it for identifying trends, entry and exit points of a trade. Various indicators exist that help users to craft and execute a trading strategy using these tools. You can learn technical analysis by signing up for demo account and start executing trades on the platform provided by your broker. The trading platform has built-in price charts and technical indicator tools which you can use to interpret the price of currencies and trade accordingly.
2- Fundamental analysis:
Before buying any currency pair, you should do a fundamental analysis about the currency pair. Fundamental analysis involves analyzing different factors that can influence the exchange rate of the currency pair. The factors include interest rates, inflation rates, GDP growth rate, industrial output figures, etc. Correctly analyzing the economic data of the countries involved in the currency pair can lead you to accurately speculate the exchange rate movement and allow you to make money.
The most effective way to make money trading in the forex market is to educate yourself on how to trade properly, create a good strategy, use proper risk management, stay consistent and stay disciplined. The forex market presents many opportunities to make money for anyone that is willing to put in the hard work. Money is a big motivator in the forex market and once you have the experience and acknowledged the skills on how to trade and invest in the forex market properly, you are set to have an extra source of income for the rest of your life and hopefully help you to the path of become financially independent. You can open a demo account and start trading currency pairs and test your skills using virtual money in the demo trading account. The more you learn and apply your skills, the better you will become at forex trading.