To become a good trader, you must learn about the trading hour and also a little about the history of Forex. The most important understanding lesson is the money-making lesson in Forex trading. Without understanding how the Forex market moves that provide the buyers and sellers profits in real cash, it is fruitless to trade in the Forex market. In this article, we will discuss some fundamental courses about Forex money trading. Do not become tense as it is very easy to make money once you have understood the basics of Forex trading.
Table of Contents
The most obvious basics of Forex trading are to understand, how you can buy a currency at a cheaper rate, and sold it at a higher price to make money. This is as simple as Peter selling finger rings to Elisa for 2 dollars each, which he bought for 1 dollar each. Remember, trading in Forex is very easy as long as you see it as easy. If you take it complicatedly, it will become more complex to you.
Here are some of the most important topics to understand to make money in Forex trading.
Increasing Exchange Rate
Does this chart ring any bellsfor you? Yes, it is the chart of the previous example of Peter selling a ring to Elsa. Here, you are the trader who is making a profit by selling the currencies at a higher rate than you bought them. It is the same as the Currency Exchange shops of your Europe travel.
Understanding Forex Quote
In Forex, you are buying the currency of one country and selling the currency of another currency. It is important for you to understand how to quote the currencies as you exchange in Forex.
Look at the chart below
The currency on the left is called the Base Currency. It is the currency which you are buying with your Dollars.
The currency on the right shows the currency that you are trading with Base Currency. It is called the Quote Currency. This currency also shows, what currency you are selling. In this graph, you can understand that it is showing that you are buying Pounds and selling Dollars.
The figure in the chart shows you, how much you have to pay to buy one Britain Pound. Here, if you want to buy 1 GBP, you have to give 1.51258 US dollars. Similarly, if you buy commodities online, you need to deal with the base and quote currency.
Understanding long and short
In Forex, long means buy. If you want to buy a base currency, you are likely to make a profit by selling at a higher rate. You have to hold on until the exchange rate rises for your base currency. That is long and means buying.
Short is the opposite of long. It means selling. You are likely to want the base currency to fall in their rate so that you can buy the quote currency at a cheaper rate. This is short and means selling.
Understand Bid and Ask
One of the commonly heard things about in Forex is the bid and ask. The bid is the price you are wanting to buy the base currency in exchange for the quote currency. The asking is the price at which you will sell the base currency at the desired exchange rate of the quote currency.
In simple terms, remember, bid means buyer. You want to buy the base currency. Asking means you are being asked what you will pay for the base currency to sell them in exchange for quote currency.
The spread is known as the difference between the bids and ask. Usually, this is the fee that you pay to the broker for offering a decent trading service.
If you can understand the topics of this article, you will be familiar with the bid and ask process of Forex trading and will be able make money in trading.