Have you have ever travelled to another country? If so then you would have needed to place a trade on the Forex market to sell your home currency and exchange it for the currency of the country you were travelling to. How to profit in forex trading is fairly straightforward when you’ve got currencies that are in a constant state of flux.
Currencies around the world all hold different values when compared with one another. Your home currency might be weaker in value than the destinations country’s currency, that’s where the exchange rate comes in.
For example, Josh is a US resident and plans on travelling to France. Josh needs to exchange his US Dollars for Euros to be able to make purchases in France, because they will not accept his US Dollars. If 1 Euro is worth $1.30 USD, then the EUR/USD exchange rate would be 1.3000 and he is going to need $1,300 of his US Dollars to be able to purchase $1,000 Euros. Keep in mind exchange rates are dynamic and change every minute.
Josh takes that holiday to France, converting $1300 USD into 1000 EURO’s. Josh has had a great time on his trip and it’s now time to go home, but he still has 400 EUROs left over unspent from the holiday, and the EUROs are not going to be any good to Josh back in the United States. So he exchanges the leftover Euros back into US Dollars at the nearest currency booth.
While Josh was away on his holiday the exchange rate for USD to EUROS changed from 1.3000 to 1.4000, so when Josh converts his 400 EUROS, he receives back $560 USD. This is the basic principle on how to profit in Forex. You capitalize on the changing exchange rates. So a congratulations is in order for Josh, because he has just made a profitable Forex trade.
Now thanks to the internet we don’t have to travel to currency booths in the airport terminals, or shopping centres, or make a trip down to the bank to exchange currency. We simply need to sign up with an online Forex broker, download their charting software, log in and within minutes you can be buying and selling currency.
So how to profit in Forex trading? Well traders look for trading signals to forecast the movements of currency exchange rates by using a wide variety of techniques used in the trading speculation profession. Some traders may use economic data from countries’ economies to speculate whether the currency will most likely weaken or strengthen. Other traders may use chart indicators, which are mathematical formulas designed to print lines, and graphs over the chart template. These algorithms are fed by historical price action data to aid the trader in making trading decisions. These are just 2 of many trading styles applied in today’s markets.
We make our trading decisions by using price action alone, that’s really how to profit in Forex trading. We utilize the raw price data on the chart to determine the most probable direction of future price movements. Price Action isn’t complicated and it is actually the most powerful method used in the markets today because of its simplicity. To learn how to trade with Price Action, we offer an advanced Price Action Trading Course for those who are serious about making the switch to price action trading, and a dedicated to seeing their trading through no matter how difficult it may seem.
That article collected from : theforexguy
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