So, you may have heard the term forex trading as you were unintentionally eavesdropping on a strangers conversation (it’s always unintentional, right?) You may have heard your friends discussing their next investment in forex trading, or you may have even heard the term on TV. But what exactly is forex trading? What does the term forex stand for, where does it come from and how can you get involved? If you are asking yourself these very questions, then you’re definitely reading the right article. This is all about forex trading for beginners. Get ready to fill your boots with knowledge and become a forex expert- you might even have the odd novice eavesdropping on your forex discussions in the future…
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Forex Trading- An Overview
The forex in forex trading is an abbreviation of foreign exchange. Now, many of you may have heard of the foreign exchange, but for those of you who haven’t, the foreign exchange is the currencies of other countries and the purchase of one currency with another. If you have ever travelled to a foreign country, the likelihood is that you would’ve used your native currency to purchase some of the currency used in the country that you are travelling to. Say for example you were travelling to America from England, you would need to use your British pounds to buy some dollars to spend in the USA.
How many dollars we get for the pounds we spend all depends on the exchange rate at the time. If the exchange rate says, 1.2600, and you want to buy £300 worth of dollars, you would get $378. If you travelled to America and then returned to the UK with your $378 unspent, you would need to change it back to pounds. If the exchange rate for the pound had risen to whilst you were away, and you changed your dollars back to pounds, you would get more than £300 back. This means that you have made a profit on your currency- great! And this my friends, is forex trading in a nutshell- buying one currency with another, holding on to it short term or long term, and then selling it back, exchanging it for its original currency and making a profit. However, instead of travelling to America and back again, it is all done online. Convenient, isn’t it?
So, there you have it- forex trading for beginners. Hopefully, you are now a bit more clued up on the jargon and could confidently explain to your forex trading beginner friends the ins and outs of the forex trading world. If you would like to widen your knowledge even further and maybe even try forex trading yourself, there are many websites and guides out there to help you. For hints and tips, and for further information on how you can get involved.