When you begin trading the forex market, it is important to understand some of the basic terminology before you start investing your time and resources. When you begin trading the forex market, you are trading currencies.
“Let’s look at a situation where the U.S. dollar is expected to weaken in value relative to the euro.” “A forex trader in this situation will sell dollars and buy euros.” “If the euro strengthens, the purchasing power to buy dollars has now increased.”
The trader can now buy back more dollars than they had in the beginning, therefore making a profit. Read more…
Forex is commonly known as the “foreign exchange.” The Foreign exchange refers to the buying and selling of curency in the foreign exchange market, especially by investors and speculators. The “buy low and sell high,” applies to currency trading. A forex trader purchases currencies that are undervalued and sells currencies that are overvalued; as a stock trader purchases stock that is undervalued and sells stock that is overvalued.
The Forex market is the largest capital market in the world. Unlike the stock market, where investors have thousand of stocks to choose from, in the currency market, you only need to follow eight major economies. There are eight countries that make up the majority of trade in the currency market.
Eurozone (the ones to watch are Germany, France, Italy and Spain)
We recently released a series entitled Financial Planning, which provided a financial blueprint in order to create a financial plan. We will provide content from this series to help one create and build an investment portfolio.