What is Forex? An indepth look

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Forex definition

Forex is short for Foreign exchange. This market is the supply and demand of currencies. If you’ve ever traveled to a foreign country, you will exchange your currency to the one of the foreign country so you can pay for stuff. The price you pay for the other currency is the exchange price, which is determined by the Forex market.

Exchange price

The exchange price is the value of the currency in relationship to the other currency. If the exchange price is favorable to you, it means that your currency is more expensive than the one you are exchanging it to. This is where you can profit in this market.

So for example:

Let’s say you are French and you travel to America. You bring euros with you and want to exchange the euros into dollars. At the airport you go to the currency exchange and find out the rates. You see that euro to dollar rate is 1.1200 at the moment. This means 1 euro is worth 1.12 dollars at the time you are exchanging your money. So if you exchange 100 euros to dollars, you receive 112.00 dollars.

So how do you profit from this? Let’s take our previous example and let’s say that the euro to dollars rate has gone to 1.0000 the next day. So 1 euro is now worth 1 dollar. You still have 112.00 dollar and you exchange it back to euro. You now receive 112 euro. Hey, wait a second! You had only 100 euro when you first exchanged your money and now you have 112 euro. This means you have 12 euro of profit now. This is how you profit from the Forex market.

Bigger profits with online brokers

Now 12 euro isn’t much profit for the price you deposited. If you use a good online broker though, like the ones we suggest, you can get good leverage. With leverage, like explained earlier, you can make more profit than you deposit. So with only 10 bucks you can profit 30, 50 or even 100, but only if you trade well, and practice a lot. It’s not realistic that you can gain profits with no practice. With no practice and bad methods trading is risky!

Online brokers

In the trading world you can trade in currencies without traveling to a foreign country. You can do this with the help of online brokers. Doing this you can trade independently and profit in your comfortable home.

If you haven’t opened a trading account yet, you should do it now, because it might take a while before your registration is checked. You will also receive a welcome bonus, which you can use to practice our tips!

Big volumes

As I told you, the Forex market is big. That means the volume in which you will trade is also big.

For example:

  • The NYSE stock daily trading volume is about 25 billion dollars.
  • The Forex market has a daily trading volume of 1.5 trillion dollars.

Take a look at my graph here:

market-volumes-graph

As a conclusion, the Forex market is almost 60 times bigger. This means you can trade two dollars and make a hundred profit in only one minute, if you trade correctly.

Be aware though, this also means you can lose your money. Just be aware which broker you choose, because if you choose rightly, the broker you choose won’t let you lose more than your deposit. So play it smart and you can earn good money in the Forex market.

Just be sure to keep on reading our Forex guide, practice in demo, but also practice with real money. Practicing with real money is important, which I will explain in the section ‘how to practice’ later.

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