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Earning Money With Forex: what you Need to know.

Earning Money With Forex


How to make money online with Forex as a beginner?

It is possible to make money online not only with blogs, digital products and online trading, but also with Forex, the currency trade. For beginners, this subject is quite complex and not very easy to understand, but those who have a very good knowledge of the financial markets or who have undergone financial training should be familiar with the subject of currency trading. With this kind of investment, for a beginner forex trader to make money, it is enough to get into the highly speculative trade of forex. However, without proper knowledge and experience, no one should take the risk of facing a total loss of money. Furthermore, no one should act in the Forex business with money that is necessary for subsistence.

Forex: What is it?

Forex stands for Foreign Exchange. It is used to describe the buying and selling of one currency in exchange for another. The following situation is an example, the US dollar is losing value and price against the euro, so a Forex trader sells dollars and buys euros. In effect, the euro gains purchasing power to buy dollars. In this respect, Forex is similar to stock trading, where the trader will buy a stock or exchange that he expects to increase in price and sell a stock that is likely to decrease in value. The Forex market is considered the most traded market on the internet in the world as millions of people, companies and states are active in it. As soon as you exchange your country's currency for another country's currency, you are participating in the foreign exchange market. The Forex market has a daily turnover of more than five trillion US dollars, which shows the size of the market.

How does Forex trading work?

In simple terms, the Forex market always exchanges one currency for another (so-called currency pairs). Each currency pair is assigned a market price, which indicates how much of the second currency you need to buy one unit of the first currency. As an example, the exchange rate of the euro and the dollar is 1.230 EUR/USD. One euro therefore costs 1.23 US dollars. Let's take the above exchange rate as the basis for conversion. So you pay 1,230 US dollars to get 1,000 euros. The EUR-USD exchange rate now changes to 1.44. You can now sell your 1,000 euros and get 1,440 US dollars, the difference between your first purchase and the current sale is 210 US dollars, so a profit. However, the whole thing can also be in the loss bracket if the euro loses value and the exchange rate would be 1.120 for example. With a sale, you would get $1,120 and you would have lost $110. This strategy seems quite advantageous.

Important basic terms in Forex
The exchange rate

The foreign exchange market is a decentralised market that determines the relative value of different currencies. It is rare that two currencies have the same value and the exchange rates of two currencies are subject to constant change. Changes in exchange rates occur because supply and demand can rise and fall, just like other goods and services. If the demand for a currency or the supply of a currency increases, the value of the currency may decrease. In Forex, trading is done in lots. A lot is the size of a position in currency trading, a lot is 100,000 units of the base currency of a corresponding currency pair. For the EUR/USD, this would be 100,000 euros. A pip change (explanation of the term "pip" below) means that the 10,000th part of a lot changes, which is the fourth decimal place. For example, if the EUR/USD currency pair rises by one pip, the position size of a lot in the base currency has increased by EUR 10. EUR/USD increases from 1.2230 to 1.2231, or one pip. The lot size of EUR 100,000 increases to EUR 100,010. In addition to the 100,000 unit lot of the base currency, there are smaller lots.
A pip is the fourth decimal place in a currency pair or the second decimal place if the JPY is part of the currency pair. The spread or bid-ask spread of a currency is the difference between the buying and selling price of the currency. The spread is the main fee the trader has to pay to the broker or online bank for a transaction. The larger the spread, the more money the bank will make. Since brokers or intermediaries usually do not charge any commission when trading in the foreign exchange market, their income is generated exclusively by the spread. The amount of the spread depends on the respective Forex broker, so when comparing different providers you should always include this. For example, if you are still a beginner forex trader earning money and you want to exchange US dollars into euros. A trader offers you 0.920 euros per dollar. So for every 100 dollars you get 92 euros. If you want to exchange the 92 euros into US dollars at the same dealer, you will only get back 99 dollars. The difference of one dollar is collected by the dealer as a fee. In this case, the difference is 1%.

Leverage

Leverage is the ability to trade with much more money than you actually have in your account. Leverage gives you the opportunity to increase your profit margin by maximising the return on your capital. For example, if a broker offers you a leverage of 1:20, then you can trade with 20 times more money than you have deposited. So if you have deposited $ 1,000, you can trade with $ 20,000, which can result in 20 times the profit, but also 20 times the loss.

Learn forex trading

The terms explained are only a fraction of the technical vocabulary you need to learn if you want to get serious about currency trading. In addition to intensive reading of specialist literature, this also includes opening a demo account on an online trading platform and trading currencies in a playful manner. There are enough providers on the Internet. Just take a look at Libertex, where you can find out exactly what Forex is. Here you can trade in test mode until you are ready for the first real transaction. Finally, you should consider trading as a serious job, as a profession that you do full or part-time. A book with seven seals certainly does not trade in currency. The most important thing is not to write greedily, in other words, to want to earn as much as possible as quickly as possible, and to avoid common forex trading mistakes. However, if you are not at all familiar with the subject, you should familiarise yourself intensively with the subject, with literature, online courses and with a demo account on a trading platform, in order to acquire a routine, to put the learned theory into practice and to gain experience. In addition, the exchange with other forex traders - for example in a corresponding Facebook group - promotes further development. As a beginner forex money maker, never put in the money you need to live. Currency trading and investing in this type of exchange is always associated with risks.

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