About Forex

Forex, i.e. Foreign Exchange, is an international currency exchange market. Currency rates are constantly moving in the Forex market under the effect of various factors, and banks, investment funds, exporters, importers, large and smaller businesses as well as individuals trade currencies against each other there.

Some Forex operations are conducted to serve international trade and capital flows, the others are performed to make a profit from exchange rates change. The first thing individuals are interested in is an opportunity to earn in the Forex.

Trading in Forex, or Forex trading, means execution of foreign exchange. To trade in Forex, you just need an Internet connected computer and a small opening capital. The larger the opening capital, the more profit a trader may expect to gain.

A Forex trader is a person who is in the Forex trade. Being a trader has its merits: no fixed office hours, no superiors, no business rivals, and no limits in earnings. Trading is an interesting, creative, work where anyone can be his/her own master.

Forex principles

Being a foreign exchange market, it is easier to explain the Forex principles by comparing them with those of an exchange office.

What Forex and the exchange office have in common?

How Forex and the exchange office differ?

How to start trading?

To start trading on Forex, you need to open a real trading account. Apart from real accounts, Forexite also provides virtual ones, called training or demo-accounts meant for training purposes, not for real trading. Account opening with the Forexite company is as follows: click the "Sign up" button and fill in the form, confirm your acceptance of the agreement, and choose your username and password. The account will be opened upon data verification.

After the account is opened you are required to transfer a security deposit to it. The easiest way to make a transfer is using a bank card. While trading, the deposit will be credited with profit on good deals, and debited with losses in the event of bad ones. You can fund your Forexite account with a deposit in several currencies (please see the complete list in the trading conditions). The transfer procedure is described on Funds Transfer page in more detail.

Let's assume a trader has added 2000 USD to his/her trading account.

As soon as the deposit is added, you can start trading. Before that you need to decide which currency pair (or instrument) and the amount you want to execute a trade for, as well as whether you want to take a long or a short position.

Let's take as an example the most popular instrument of EUR/USD (a EUR to USD rate) and Euro buying for USD. Suppose the Forex EUR/USD rate is 1.2502/1.2505. It means the trader gets 1.2502 USD for 1 EUR, and pays 1.2505 USD to buy 1 EUR. With the deposit equal to 2000 USD and a leverage of 100, you can execute a trade for an amount up to 200 000 USD. However, you are recommended not to use the whole leverage so as to limit the risk. Assume the trader has bought 20 000 EUR for USD. At the specified rate he/she has paid 25 010 USD for the 20 000 EUR (it is calculated as 20 000 * 1.2505). By buying the trader has thus opened a position.

When the position is open, you have to wait until the rate moves in the direction you need – of course, given that you have predicted correctly – in order to close it profitably. The position may be open as long as you want.

Assume that during the day the rate has advanced from 1.2502/1.2505 to 1.2600/1.2603, and the trader has made up his/her mind to close the position with the opposite trade selling the 20 000 EUR for USD. He/she gets for this amount 25 200 USD (it is calculated as 20 000 * 1.2600). The result is that the trader profits 190 USD (the sum is computed as 25 200 - 25 010, or as 20 000 * (1.2600 - 1.2505)). Thus, the profit made from the two trades in the example comes to 9.5% of the deposit placed.

The last operation we'd like to consider is profit withdrawal from a trading account. A funds transfer from a trading account is usually made the same way you have funded your account. There is no necessity to withdraw after each trade as you can simply accumulate the funds on your account, or use them for further trading because they will allow you opening positions for larger amounts.

How to learn to make money on Forex?

The above Forex operations are practically as simple as that. And the aim of the operations is also clear: buy low, sell high. However, a trader's main task, which is the right trading decision-making, is not as simple and requires some certain knowledge.

There are different methods of market and decision-making analyses but all of them are based mainly on two approaches:

The issue of how to learn earning through Forex is not within the scope of this article. There are many books about it that we would recommend you to begin with.

You are recommended to open a virtual account, or a real one with a small amount, to put your knowledge to use. During training and studying theory you will choose the way you would prefer to trade in, or develop your own one. Training may take you a few months, or a few years.

Anyone may become a Forex trader, but one has to work hard to succeed in trading as in any other business. Trading through Forex requires attention, self-control, and an ability to analyze a situation and make a decision fast. It gives freedom and potentially unlimited income in return.