Forex Trading: The Ideal Home Based Business

Many of us think about the financial markets in terms of investment, putting aside money for a long term or better still, having a professional manage our investments for us. But how many of us have considered that we could actually trade for a living? In fact it is the perfect home based business.

There are very few costs associated with online trading. Apart from a good computer and a fast and stable internet connection, there is really nothing more you need to invest in. There are no staff fees, no bosses to report to and unlike so many work-from-home schemes found on the internet, there is no sales aspect. Other advantages are the open schedule and open marketplace.

 

• What is Forex trading?

Forex trading involves the trading of one one currency for another. You may have not realized it, but if you have ever traveled overseas, you have already engaged in it. When you exchanged your currency for another you actually traded in forex. You may have noticed when you visited the forex company or bank again, the rate had changed, giving you more or less for your money. Prices go up when there is more demand for a product and down when demand falls. The same principle is also applicable to the forex market. Not only individuals but banks, governments and multinational corporations also engage in forex trading. Even countries have to do forex trading to get money to pay for imports.

Forex is always traded in pairs. When you buy a particular currency, you have to sell another, hence the term 'exchange'. When we talk about paired currencies, the value of the first currency is always one. The second currency value or the quote is the value you see on television, in newspapers, or on trading software.

• How the trade works

When the price goes up, it means that either that the base currency is going up in value or the quote currency is declining. If the price of the pair declines, it means that the quote is gaining on the base currency or the base if loosing against the quote. You can get this information through forex news. For example, if the global price of oil is increasing and the Canadian dollar is likely to benefit from this, the trader will look to sell the USD/CAD. In trading terminology this is called 'shorting'.

If the price does decrease you could then buy it back for a cheaper price, thus making a neat profit on the transaction. If you think for some other reason the price is going to rise, you buy it, in effect you go 'long'. A currency's price can fluctuate at the least by a small unit. The unit is called a pip and it is 1/100^th of a cent.

In other words when the exchange rate of the USD to the Canadian dollar changes by 1 percent, then the USD/CAD moves by 100 pips. Many currencies sell in lots of 100,000. This way, 1/100^th of a cent will also amount to quite a bit of money. Many brokers offer lots of 10,000 called mini lots, others offer micro lots of 1000.

 Author Bio;

Grace is a financial expert associated with Forex News a company that brings various foreign exchange rates and helps conversion of Pound to Euro.

Get Free Updates in your Inbox

Follow us on: