What is online forex trading?

Online forex trading is also being called currency trading. Like the description already mentions it; it’s about trading currencies.

Online forex trading is increasingly getting more known, but what’s the reason that online forex trading is that popular and how can you manage to trade on the currency market in a profitable way? It isn’t the right moment right now to overwhelm you with a profound explanation, but of course it is rather important to have some kind of view whether online forex trading could be of any use to you as well.

The currency value says something about the economic development of a country

Simply speaking the value of its currency tells a lot about a country’s economy. If all goes well with an economy, the value of a currency will consequently rise, on the other hand if an economy is in a bad shape, the value of a currency will consequently drop. Once again, this is a very brief explanation, but you’re still going to discover how it all exactly fits together.

Currencies are always being traded in pairs

A currency is always being compared with another currency and this is called a currency pair. Like this for instance we know the currency pair EUR/USD, at which the value of the euro is being compared with the value of the American dollar.

As currencies are being traded in pairs, always two transactions will take place. One currency will always be bought while the other currency will always be sold.

Actually two economies are being compared with each other and the result of this comparison is being expressed in the exchange rate. When it’s expected that things are going to improve with regard to the European economy and at the same time a baisse in the American economy is expected, as a consequence the value of the euro will rise compared with the value of the dollar and then the rate of EUR/USD will also rise.

Earning money with online forex trading

So forex traders are actually speculating whether a currency pair, like for instance EUR/USD, is going to rise or to drop. When a forex trader is expecting that the rate EUR/USD will be going to rise, he’s consequently going to buy euro’s and he’s going to sell dollars (a detailed explanation will follow). If the rate of the currency pair EUR/USD is really going to rise, the forex trader will consequently earn money. On the other hand if the rate drops, the forex trader will lose money.

The analysis’s of a forex trader: Fundamental and Technical analysis.

A forex trader can analyze in two different ways whether a currency pair is going to rise or to drop, namely by means of fundamental and technical analysis’s.

Fundamental analysis means that a forex trader speculates how the rates are going to develop based on news bulletins among other things in the economic, social and political field. An uncomplicated example is a news bulletin about the economy of a certain country going downwards. In such a case there is a very big chance, that the currency rate of this country is going to drop likewise.

A technical analysis is especially based on the rate development during the recent past. In this case online forex charts and other technical means are used in order to get a picture of the future rate by means of the rate development in the recent past.

Don’t you worry, at the beginning it all seems to be more complicated than it really is. You don’t need to be an economist and you neither have to dispose of a gift for mathematics to become a profitable forex trader. Knowledge of economics and mathematics on a secondary level will be amply sufficient.

Conclusion

Up till now you dispose of a very brief view of what online forex trading means. Probably you might be familiar with investing in stocks and/or with playing poker. To get an even better picture of online forex trading, we’ll discuss a number of important differences and similarities by means of the following online forex introduction articles. This way not only all important items of online forex trading will get a chance, but you’ll also be able to estimate rather precisely whether online forex trading might eventually be your piece of cake too.

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