We’ve all heard the same story. Guy hears about FOREX, thinks he knows everything about it and ends up losing all of his money. And he could have avoided the loss if he only knew more about FOREX trading and how you should approach it. But diving straight in seems like a bad idea, so let us try and simplify things a bit, just to paint a better picture.
Imagine you decide to go on a trip to Europe, for instance. You make a list of everything you need and you notice that they don’t use US dollars in Europe. Well, maybe some people do, but euros are the currency you will need 99% of the time. You decide to exchange dollars for euros, which means that you buy euros with your dollars and for the sake of our example, let’s say that you got around 70 euros for $100. Then you leave for Europe and when you arrive there, the market fluctuations have led to some market fluctuations which in term have led to exchange rate fluctuations. This is just fancy talk which means that now $100 could buy more or less euros, depending on the fluctuations.
Now if the rate goes up, meaning you can sell your 70 euros for more than $100, you are presented with the opportunity to make a bit of a profit. And if 70 euros will buy you less than $100, you can just leave your money converted to euros and avoid making exchange rate difference loss.
This is just a very simple example to how profit from FOREX trading is made using the exchange rate difference, and of course, how to avoid losing money. Check the other articles in which we will dive deeper into the wonderful world of making money using FOREX trading.