How to invest in Forex and earn money
Trading in the currency market, also known as Forex trading, can be an exciting hobby and also a great source of income. To compare it with something, the stock market moves around 22 billion dollars a day, while the forex market moves 5 trillion dollars. You can trade in forex from the Internet in a simple way, How to invest in Forex and earn money
1 – Learn the basic vocabulary of forex.
The currency you spend in forex, whatever the currency, is called “base currency.” The currency you are going to buy is called “target currency.” In the forex market, you use one type of currency to buy another.
The “exchange rate” tells you how much you have to pay in the target currency to buy the base currency.
A “long” position means that you want to buy the base currency and sell the target currency. In the example above, you would be selling US Dollars to buy British Pounds.
A “short” position means that you want to buy the target currency and sell the base currency. In the example, you would sell the Pounds to buy Dollars with them.
The “Offer” price (“Bid” in English) is the price at which your broker would like to buy the base currency in exchange for the target currency. The Offer price is the price at which you can “sell” the target currency to the market.
The price “Demand” (“Ask” in English), is the price at which your broker sells you the base currency in exchange for the target currency. Similarly, the demand price is the price at which you can buy the currency from the market.
The spread is the difference between the Offer price and the Demand price.
2 Learn to read a currency exchange rate.
You will see two numbers in the exchange rate of each currency: the Offer price, on the left, and the Demand price, on the right.
3 – Decide which currency pair you want to buy and sell.
Learn to make predictions of the economy of those two currencies. If you think that the economy of the United States will weaken, which will be bad for the US Dollar, then you will want to sell Dollars and buy with them a currency that will strengthen.
Research the export and import balances of each country. If a country has many products to export, the country will want to make money by exporting. This fact produces an improvement in the economy of the country, and will produce a positive effect on the value of its currency.
Consider the political events. If a country has elections soon, its currency may be strengthened or weakened according to the political leader who wins them, due to the economic orientation of the different parties. In addition, if the government of a certain country generates measures that stimulate economic growth, its currency will increase its value.
Read the economic analyzes. The analyzes of economic growth and the state of industrial production, as well as data on unemployment and inflation, have a great effect on the value of currencies.
4 – Learn to calculate the benefits.
The value between two different currencies is measured in “pips”. Normally, a pip is a change of 0.0001 in the value of a certain currency with respect to another. For example, if the Euro against the Dollar changes from 1.5467 to 1.5468, the value of the EUR / USD currency pair has increased by 10 pip.
Look at the number of pips that the currency pair has changed since you bought it until you sold it, or vice versa. This way you will know if you have earned money with the operation or not
5 – Watch your earnings and your losses.
Above all, do not get carried away by emotions. The Forex market is very volatile, so you will see many ups and downs. The most important thing is that you continue researching well and that you use a well-defined strategy. You will finally see the earnings.
6 – Create your orders.
You can use different types of orders:
Market orders: with a market order, you ask your broker to execute the purchase / sale order at the current market price.
Limit order: this type of order asks your broker to execute an operation at a price that you specify. For example, you can buy a certain currency when the price falls to a certain level, or sell it if the price drops to the price you indicate.
Stop orders: A stop order tells your broker that you want to buy a certain currency when it rises to the desired level, or that you want to sell it if it falls too low, in order to limit your losses.