How to Profit from Forex Trading?
The Foreign Exchange market (also known as Currency Market, Forex Market) is a place where currencies of various countries are traded much like traditional stock markets.
Forex market let the big financial services institutions and banks to easily sell and buy currencies.
The Forex market is a very big market as it trades international currencies and is a worldwide market.
In fact, it is much much bigger than our national stock markets. And these markets work throughout the day.
According to some estimates, these Forex market record around three trillion US $s (yes that's 3000 billion US Dollars) every day, hence making it the biggest tradable market if any kind in the world.
Most of these trade is speculative in nature and people make huge bets on small variation in currency exchange rates.
These markets allow people to get huge profits (and huge losses) with comparatively small entry investment.
To make consistent profits using Forex trading you need to know the factors that cause the currency exchange rates to go up or down.
This requires a keen understanding of the way world economies react to global economic news.
The exchange rates of currently depend on many factors such as the interest rates of their central banks, country inflation rate, trade balance (trade surplus or deficit) etc.
If you have a clear understanding of these and have enough knowledge of learning the key economic news then you might profit immensely from Forex Trading.
Now let's see some of these factors.
A country’s currency exchange rate with other currencies typically affected by the supply and demand for that country’s currency in international exchange markets.
This is called a floating exchange rate.
If demand, for say dollars, exceeds supply, then the value of the dollar will go up.
If however, the supply of dollars exceeds demand, then its value will go down.
A huge amount of money is bought and sold in international exchange markets for many different currencies.
Interest rates:
For example,
If interest rates in India are higher than in the USA, then investors will choose to invest in India borrowing money from the USA, where they are getting cheap money for a low interest. To invest in India, they need to buy Rupees.
This increase demand of Indian rupee against US dollar. Hence Rupee will strengthen compared to the US Dollar.
Inflation:
If US inflation is higher, investors are less likely to invest in the US because the expected returns are low because of high inflation.
Hence the higher inflation in a country will adversely impact its currency strength.
So you need to have a clear understanding of all these to profit in Forex trading using the currency fluctuations.
In addition, there are several technical charts that help investors in deciding the movement of currencies.
These will help smart short term trading to do successful trades using small currency fluctuations.
Various Currency trading platforms will provide their traders with these charts in their trading platforms.
0 Comments