Before you can make your very first trade on the foreign exchange market, you have to know a little bit about Forex trading basics. This is important because in the market, 10% of investors will win the remaining 90% of investor’s money. If you do not want to loose money, then you must know the basics.
For starters, you have to realize that the foreign exchange markets operate 24 hours a day, 6 days a week. Every major country has their own market which is why this occurs. The value of the currency pairs is dependent upon a number of factors, but in most cases it can be attributed to supply and demand. When more people want a particular currency, then the value of that currency increases. Knowing when to trade and what to trade will obviously take some experience, but eventually you will be able to consistently make winning trades.
In making an actual trade, you are trading in currency pairs; one currency for another. However, if you trade US Dollars for British Pounds, you cannot simply go out and trade those pounds for another currency. Think of it more like purchasing a share of the currency. If you trade the Dollar and Pound, you will eventually have to trade them again to get rid of your share. The concept is known as currency pairs and when you purchase a pair, you will eventually have to sell it; for a profit or loss.
You have the currency which is being purchased, as well as the currency that is making the purchase. The currency you are purchasing is the second in the pair. You goal as an investor is to purchase a currency in which the value of the pair being purchased increases over the value of the currency making the purchase. If it does increase, then you make a profit, minus any fees. However, if it does not increase then you make a loss including the fees.
In the end though, the most important thing anyone needs to become truly profitable with regards to the foreign exchange markets, is experience. You will loose money while building this experience. But eventually you can make those losses back if you stick at it and continue trading, while making sure you are also learning. If you work hard to develop the necessary experience and take every opportunity you can to learn as much as possible about the currency markets and investing in them, you will build the necessary experience and knowledge to become profitable on the markets and make money with Forex Trading.