What is “forex trading”? We often hear that some people buy and sell foreign exchange and make a lot of money, but some people lose a lot of money. This article will explain what is foreign exchange trading? How much principal is required to trade? Also, can investing in foreign exchange trading really make money?
Foreign exchange margin trading (FX/Forex Trade is a derivative financial instrument that pays a margin to a securities company or bank and then finances the trading of foreign exchange. Just like buying a house or buying stocks, it is an investment method for money.
The so-called money is to use the value of money to earn more wealth. And foreign exchange margin trading (FX/Forex Trade) is one of them. The full name is Forex Exchange, which means financial derivatives with different currencies in circulation, such as the US dollar, Euro, British pound, etc.
Foreign exchange trading is the use of exchange rate spreads to make profits
Buying and selling foreign exchange investment means buying in the expectation that a certain currency will appreciate, and then selling it when the currency really appreciates, earning the difference in profit brought about by the appreciation. On the contrary, if the exchange rate of a certain currency is expected to fall, it will Sell that currency and wait until the currency has fallen and then buy it back. This way, the currency exchange rate depreciation can be used to make a profit.
In everyone’s daily investment concept, depreciation or decline is not good or loss of money, but this is not the case in foreign exchange investment, because foreign exchange trading does not focus on rising or falling. The most important thing is that as long as the exchange rate changes in price Yes, but in the property market or stock market, basically if it is not expected to appreciate, even if real money or hard-earned money is used to invest, it will ultimately be a waste of precious time and money.
But in the foreign exchange market, the exchange rate difference can be used to make a profit. We can first buy and then sell to close the position, or sell first and then buy to close the position. Even if the currency depreciates, we can profit from it, so when investing in foreign exchange trading No matter which currency you choose, you can make a profit from the rise and fall of the currency. However, in ordinary life, it is very difficult to have this kind of situation where you can sell first and then buy, and sell what you don’t have, so many people don’t have this mode of thinking. However, this thinking model or concept is very important for trading in foreign exchange investment.
Changes in exchange rates
The Euro-to-Dollar is from the exchange rate of 1.0340 in January 2017. By January 2018, it had risen to 1.2540, and it has appreciated by 2200 pips in just one year. This volatility is in foreign exchange trading. It is a big volatility. If investors buy at the low price of 1.0340 and sell at the price of 1.2540, they can make a huge profit of 2200 pips.
What is the difference between foreign exchange and stocks?
Both stocks and foreign exchange use the difference in stock prices or exchange rates to make profits, and both are ways to make money. However, there are many differences between the two. One of them is that if you have experience in stock trading, it is easy to feel that whenever you see a drop in stock prices, you will have the urge to enter the market, the so-called bargain hunting. However, when buying and selling foreign exchange, if you see the exchange rate falling continuously, it means that the exchange rate will continue to fall and depreciate in the short term. At this time, you should choose to sell the currency and follow the trend to earn the spread profit when the currency falls and depreciates.
This is the difference between buying and selling stocks and buying and selling foreign exchange. If you don’t pay attention to it and keep in mind for a long time, you will lose money and leave the market in the same way as stocks. Please pay attention to it.
In addition, there are many large and small companies in the stock market. In different industries, it is not easy to choose a company with appreciation potential as an investment target. Therefore, it is finally easy to listen to the recommendations of different securities companies and make investments. For foreign exchange investment, there are about 5 to 6 major currency countries, such as the US dollar, the euro, the British pound, the Japanese yen, the Australian dollar, etc., and there are only 10-20 options for the currency exchanges of these major currencies, compared with the types of stocks It’s really a lot less.
Another difference between buying and selling stocks and buying and selling foreign exchange is that stocks are invested in the economy of one place or country, and foreign exchange can be invested in the currencies of different countries, so foreign exchange investment will not be more tied to the economy of a single country or place. As long as there is an exchange rate gap between currencies, there can be opportunities to make money in the world.
The next article will explain how much principal is required if you invest in trading foreign exchange
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