How to make money in forex

Posted on Posted in Fx School

Make Money by trading

As you have undergone the previous article, we hope that you have already understood the basics of Forex trading. It is important to know the trading hour in forex and also know a little history about Forex. The most important understanding lesson is the money-making lesson in forex trading. Without understanding how the forex market moves that provides the buyers and sellers profits in real cash, it is fruitless to trade in the forex market. In this article, we will discuss some fundamental course about forex money trading. Do not get tensed as it is very easy to make money once you have understood the basics of Forex trading.

The Basic

The most obvious basics of forex trading are to understand, how you can buy a currency at a cheaper rate, and sold it at a higher price to make money. This is as simple as Peter selling the finger ring to Elisa for 2 dollars each, which he bought for 1 dollar each. Remember, trading in forex is very easy as long as you are seeing it easy. If you take it complicatedly, it will become more complex to you.

Here are some of the most important topic to understand to make money in forex trading.

Increasing Exchange Rate

Figure: Increasing exchange rate in Forex trading makes money

Does this figure ring any bell to you? Yes, it is the chart of the previous example of Peter selling ring to Elsa. Here, you are the trader who is making the profit by selling the currencies at a higher rate than you bought. It is the same as the Currency Exchange shops of your Europe travel.

Understanding Forex Quote

In forex, you are buying the currency of one country and selling the currency of another currency. It is important for you to understand how to quote the currencies as you exchange in the Forex.

Look at this graph below

 Figure: Forex Quote

 

The Currency on the Left is the Called the Base Currency. It is the currency which you are buying with your Dollar.

The currency on the right shows the currency that you are trading with Base Currency. It is called the Quote Currency. This currency also shows, what currency are you selling. In this graph, you can understand that it is showing that you are buying Pound and selling Dollar.

The figure in the chart shows you, how much you have to pay to buy one Britain Pound. Here, if you want to buy 1 GBP, you have to give 1.51258 US Dollar.

Understanding Long and short

In forex, Long means Buy. If you want to buy a base currency, you are likely to make a profit by selling at a higher rate. You have to hold on until the exchange rate rises for your base currency. That is long. Buying

Short is the opposite of long. It means selling. You are likely to want the base currency to fall in their rate so that you can buy the quote currency at a cheaper rate. This is short. Selling.

Understand Bid and ask

One of the most heard thing in Forex is the Bid and ask. The bid is the price you are wanting to buy the base currency in exchange for the quote currency. The asking is the price, that you will sell the base currency at the desired exchange rate of quote currency.

In simple, remember, Bid means buyer. You want to buy the base currency. Asking means you are being asked what you will pay for the base currency to sell them in change with quote currency.

Bid and Ask

Figure: Bid and Ask

The spread is known as the difference between the bid and ask.

If you can understand the topics of this article, you will be familiar with bid and ask process of Forex trading to make money in trade.