Forex trading lets you predict if one currency will grow in value next to another. Here is how it works and how you could make a profit.
Forex is an abbreviation of foreign exchange, which uses exchange rates to work out the value of one currency against another.
For example, an exchange rate of 1.34 to convert pounds to US dollars means you get $1.34 for every pound. This shows that the pound is worth more than the US dollar.
How to start Forex trading
Forex trading works by pairing two currencies together, and you predict if one currency will be worth more than the other by the end of a trade.
How to trade in Forex
You get two options when Forex trading, buy or sell. Here is how they could make you a profit:
If you buy, you need the value of the base currency to be worth more next to the counter currency, compared to when you started your trade.
If you sell, you need the value of the counter currency to be worth more next to the base currency, compared to when you started your trade.
For example, if the exchange rate for the EUR/USD was 1.1231, and you buy, you need the exchange rate to go up so that you can get more US dollars for every euro.
How Forex trading works
Forex trading is a leveraged investment, which means you only need to put down a small percentage of the value of the trade you are making.
For example, if a broker offers leverage of 100:1, you could open a trade worth £100,000 with only £1,000 in your account. This amount is known as the margin.
The margin acts as a deposit to cover any possible losses on your trades. You will also not be able to make trades that need a margin amount higher than the money in your account.
Start Forex trading
When you are ready to start trading in Forex, you have to find a broker that lets you trade on the market you want.
How to choose a broker
Be sure to only use systems that are compatible with regulated and reputable brokers. Also, make sure the trading system is easy to use. Some systems are overly complicated, which in part defeats the purpose. EZInvest offers a very straightforward interface designed to be utilised by newer traders as well as experienced ones.