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Listen here, folks. Forex trading, also known as foreign exchange trading, is a sweet way to juice up your earnings. But let’s not fool ourselves, you gotta know what you’re doing to make a profit in this game. Basically, forex is a type of day trading where you swap currencies in a market that’s open 24/7. Day trading is when you buy, sell, and close all positions within the same day. Most experts agree, forex is one of the most liquid markets out there. The global forex trade averages a whopping $4 trillion in US dollars per day (according to a 2007 report by the Bank for International Settlements). Forex investment is at an all-time high and still on the rise, baby.

Here’s the Deal:

You wanna buy low and sell high in currency exchange. Since money is the only financial instrument we’re working with, there’s no other way to play it. When you’re trading one currency for another, make sure the buying price is lower than the asking price. That’s the money move. For example, let’s say you’re changing EU to USD, and the bid price is 1.3510 while the ask price is 1.3515. The difference between the bid price and the ask price is what you gain per dollar traded. That comes out to .0005. We call those “pips.” In this example, the spread is 5 pips. The spread is just the difference between the buying rate and the selling rate, capisce?

Do Your Homework:

Like any real player, you gotta study the market in forex trading. This will give you a leg up on the competition. When doing your research, make sure you cover these three basics:

1. Economic Factors – meaning the economic conditions and policies of a currency region.

2. Political Conditions – politics can cause a currency’s value to rise or fall. Be wary of countries that are unstable and observe the countries that are making moves.

3. Market Psychology – don’t jump on the bandwagon too quickly. Traders sometimes get ahead of themselves, causing a market to become overbought or oversold. Keep your head, baby.

Get Friendly with the Trading Tools:

There are loads of online forex trading software out there for you to learn from. Some sites even offer trials and trading games for you to practice without risking your hard-earned money. Once you get the hang of the software, you can move on to the real deal.

Learn the Lingo:

The best way to trade is to know everything there is to know about the market. That goes for the lingo, too. Get familiar with the technical and slang terms used in forex trading so you don’t get lost in translation. If you know what’s up, you got a better handle on what’s going down in the market.

Use a Broker:

A broker can be an individual or a company that takes care of your forex business for you. There are plenty of forex brokers available online, but be careful picking the right one. Do your research on the broker you’re interested in by checking out their website. Most firms offer a broker’s history and reputation, so you won’t be walking into it blind.

All in all, forex trading is a game that’s easy but risky. If you’re patient enough to study and observe the market, and yet bold enough to make decisions, then foreign currency trading is your flow, my friend.

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Ihab Salloum