Trading Currency Blog

Pelendra asked:


I understand that it has something to do with governments trying to fix exchange rates, but my textbook isn’t making the rest of it clear.

GRIFFITTS

Amar Mahallati asked:


Forex trading has become extremely popular recently. Do you know what Forex Trading is? What is it exactly and how can you make money from trading currencies if you are not an expert trader? You will find the basic knowledge in this article.

Forex Trading = Foreign Exchange

Forex trading is also called “currency trading” or “FX,” short for “foreign exchange.” While foreign exchange does not get as much attention as the stock market, options and commodities do, for example, it is nonetheless the biggest market in the world. The foreign exchange market also offers investors a huge opportunity for profit.

When you trade on the foreign exchange, you do not trade stocks or bonds. You trade in currency. Basically, forex trading involves buying one currency and selling another. As exchange rates fluctuate, you make money or lose money.

With forex trading, you don’t invest in a single company or group of companies as you do with stocks or mutual funds, for example. Instead, you are investing in a particular national economy. You are pinning hopes on one nation’s economic health versus that of another.

As an example, let us say that you are comparing the Japanese yen and the US dollar. Your research seems to tell you that the US dollar is undervalued and will soon rise in price; simultaneously, you expect the Japanese yen will lose some value. In that case, you would execute a trade to buy US dollars and sell Japanese yen. If you are correct, the exchange rate will go up and you will profit from your analysis.

Even though this sounds easy, though, it is not. In fact, currency prices can be very difficult to predict, because so many things can cause a change in exchange rates. You also have to remember that with currency trading, you trade in pairs. Therefore, you buy one currency while you sell another. Therefore, you won’t just look at one nation’s economy, but you will be comparing two.

Of course, you do not have to limit yourself to just the US dollar and the Japanese yen, for example. There are many dozens of different currencies to choose from, with seven major ones. Therefore, if you are just starting out, I would recommend that you stick to the seven major currencies. They are as follows:

USD - US Dollar

EUR - the Euro

GBP - British Pound

JPY - Japanese Yen

CHF - Swiss Franc

AUD - Australian Dollar

CAD - Canadian Dollar

If you are a small investor, you will generally concentrate on trading these particular currencies.



MCNEILLY

John asked:


I am looking into opening an account with forex and I had a few questions.

I have on of their practice accounts and I like it but some times the exchange rates do not change. The rates freeze up from time to time. Why is this? Is the market closed at some time? Also is this just with my practice account or does this happen with live accounts too.

Another question is what is the minimum investment that you can start an account with and be able to trade? I know its like $250 or something, but when you trade, the smallest amount is like $100,000. I know that with leverage that can be $1,000 but is there any way to get that lower?

Thanks for any responses!

WAAGE

champaneri p asked:


Who decides the exchange rates and how ?

STELZER

John asked:


I am looking into online currency trading and i was wondering what the best website or company is the best. I know some companies have different spreads on the exchange rates and it is better to have small spreads. Also what fees are involved in each company.

COMTOIS