Forex Trading: Are You Gaining or Losing?

By Damon Nelson

Did you know that you can find a market that is open 24 hours a day? The market is called Forex market and if you go there, you can't find services, commodities and goods. The Forex market is the place where different kinds of currencies are traded. In every trade, two currencies are involved. For instance, you can sell your Canadian dollars for Euros; or you can pay Japanese Yen for US dollars. Forex rates or exchange rates can change unexpectedly. You need to monitor these exchange rates in order to determine if the price of a certain currency increased or decreased.

In one day, a certain currency can change its value for a number of times without prior notice or warning. Hence, it is very vital to keep track of the trends. Political events and economic changes are huge contributors to the movement of the Forex market. To help you determine if you are losing or gaining in Forex trading, this article will be discussing important points you have to take nate of.

Exchange rate has a great effect on Forex investment. To understand the real relationship between these two, you must make yourself familiar with the nature of Forex quotes. Similar to currency pairs, Forex quotes are also in twos or pairs. Let me show you an example:

1.Suppose the currency pair is USD (US dollar) and CAD (Canadian dollar)

The Forex quote for this pair is USD/CAD=170.50; this is interpreted as 'every one US dollar is equivalent to 170.50 CAD. The currency found at the left side is known as the base currency and it is always equivalent to 1. The currency found at the right side is called counter currency. The stronger currency is always the base currency and in this case, the USD. The Forex quote's central currency is USD and so you can find it in most Forex quotes.

How can you determine if you're earning profits or not? You can use another example.

2. In this example we will be making use of EUR to USD. Let's assume that the Forex rate is 1.0857. For this case, the USD is the weaker currency. Say, you bought 1,000 Euros, you have to pay $$1,085.70. After a few months or a year, you saw that the Forex rate is now up to 1.2083. Meaning, the Euro value has increased. Now, if you will be selling your Euros, you will be getting $1,208.30. You have gained or earned $122.60. On the other hand, if the Euro's value plummets down to 1.0576, the currency has weakened. Hence, if you sell it at that rate, you will only be getting 1,057.60, $28.10 less than of its price when you bought it. At this situation, you've lost.

Similar to mutual funds and stock, a lot of risks are involved in Forex trading. This is due to the fluctuating trends in the exchange market. Government bonds have low level risks but the returns that you could earn are much smaller. For you to rake-in higher returns, invest in Forex trading. However, you must be ready to face the consequences of its risks.

You must set financial goals for the short term, as well as for the long term. By doing so, it will be much easier to balance the risks involved and the security. You will be able to conduct your trades with ease and comfort. Make use of all the available Forex trading tools so that you can make wise and profitable trades. After reading this article, you can already calculate if you're gaining profits or not. - 23221

About the Author:

Make money from money, this is the sole purpose of Fap Turbo. Visit Damon Nelson's site to watch 30-second product reviews at FastVideoReview.com.