What is forex trading?
Forex comes from ‘foreign exchange’ and refers to trading in currencies (and recently also cryptocurrencies). It offers the opportunity to make money with current knowledge, an economic mindset and smart trading. For example when the FED or ECB adjusts the interest rate or a country goes to the polls.
Forex is about trading currencies. With a total daily turnover of many trillions of dollars, the forex market is by far the largest market in the world. The Dollar (USD) is the most traded currency, but also the Euro (EUR), the yen (JPY), the Dirham (AED) and the pound (GBP) are good for substantial turnovers. And also cryptocurrencies are becoming more and more important.
So why should you trade forex?
Because it doesn’t have to be going well with the general economy to be able to make a profit out of forex trading (you can earn from rising as well as from falling prices), because the transaction costs are low and because you can trade online day and night. Moreover you can profit from very small price movements (of hundredths of a cent) by using so-called CFD contracts.
What does a forex trader do?
A forex trader tries to make money by anticipating expected currency movements. If you expect that the dollar is going to rise in value compared to the euro, you’ll buy dollars, in order to subsequently, when the dollar has indeed risen in value, sell your dollars again for euros. Then you’ll have more euros than you started with and you’ll have made a profit.
How can you start trading forex?
Getting started as a forex trader is possible using eToro, a widely popular online trading platform. There are many free tutorials, the site is available in multiple languages, including Arabic, payments are made into account and you can practice for free on a demo account. Please note: with eToro you trade with is so-called CFD contracts, where 60 – 75% of private investors lose money. More information on this subject on the eToro’s website.
68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
Making wise forex trading decisions by following the news
The best thing about forex trading is that currency movements have a lot to do with the news. Did Biden lower taxes? Then American companies can make money more easily, more investors want to invest in the US and the rising value of the dollar. Does the price of oil rise? This is good for the UAE economy and also increases the value of the Dirham. If an EU-country threatens to go bankrupt, this is bad for the future and the exchange rate of the Euro.
