How to Make Money with Forex Trading – Tips and Secrets to Forex Trading Success

Posted on 26 May 2011

How to Make Money Online with Forex Trading – Expert Tips and Secrets to Forex Trading Success: The first step to making money with forex trading is to understand the forex market and how it works. At its core, the forex market involves exchanging various currencies with the goal of turning a profit based on how currencies appreciate and depreciate compared to one another. It works a lot like the stock market in many ways, only instead of buying and selling shares in a company, you are buying and selling currencies.

All forex quotes will contain an exchange rate between the currency you wish to purchase and the currency you are using to make the purchase. The currency you wish to purchase is also referred to as the base currency, while the currency being used to complete the purchase is called the quote currency. Generally, a forex quote will be listed as base currency/quote currency = the exchange rate. The exchange rate will let you know how much of the quote currency it will take to purchase one unit of the base currency, such as how many dollar(s) it will take to purchase one euro.

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There are two basic strategies for making money with forex trading. They are referred to as going long or going short. Going long is synonymous with purchasing a base currency. The goal of this strategy is to purchase a particular base currency with the hope that it will rise in value over time. When this happens, you can then sell it back to get more of the quote currency than the original purchase was made with.

In a simple example, one unit of the base currency would be purchased for 1.5 units of the quote currency. If the value of the base currency goes up relative to the quote currency from 1.5/1 to a 2/1 ratio, the base currency can be sold back, giving you two units of the quote currency. You would turn a profit of 0.5 units of the quote currency just through exchanges in the forex market.

Selling a base currency with the hope that it falls in value relative to a quote currency is the other primary strategy, which is also known as going short. It is basically the reverse of the previous strategy, and when it works properly, you can end up buying back more of a base currency than you originally sold. Using another easy scenario, you would sell one unit of a base currency to purchase 1.5 units of a quote currency. After the base currency becomes less valuable relative to the quote currency, let’s say from a 1.5/1 to a 1/1 ratio, you can repurchase 1.5 units of the base currency after only selling one unit to begin with.

When used in conjunction with one another the two strategies can allow you to continually grow the amount of currency you have. Obviously, this practice is speculative and is far from a sure thing. Market factors such as interest rates, national debts and a country’s overall economic strength all affect the exchange rates, which change daily. Knowing the trends in the influencing factors for the currencies you plan on exchanging is the final piece to puzzle. While forex trading does come with risks, it is also a legitimate way to make money through currency exchange.

Please leave a comment below as we are always interested in hearing feedback on our articles or even other tips and advice we forgot to mention that you have used to earn money online with forex trading.

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