If you’ve ever travelled to another country, you would know that you need to go and exchange your money for the money of the foreign currency. They will set a rate at which you can exchange your money. So if you had British Pounds, the exchange people might say “we will give you USD 1.5 per pound you give us”.
Now at the end of your holiday you go home and want your British Pounds back, so you go to the same people and in that time exchange rates have changed. The travel agent now says “It used to be USD 1.5 for each 1 GBP, but now it’s USD 1.2 per Pound”. So the Dollar has strengthened. And all the dollars you didn’t spend are now worth more than when you bought them and you’ll get more pounds per dollar. Make sense ?
In essence, you have traded Forex already.
Exchange rates fluctuate constantly, every second there is a minor change. Forex traders learn how to predict these changes and purchase the currency they think will get stronger than another. There are many different systems, tools and sources of input. Don’t worry about that for now, we’ll get to that later.
The difference between someone who calls him/herself a Forex trader, and someone just going on holiday, is that a Forex trader does this intentionally and with the view of earning a profit. Also, we don’t have the expense of plane tickets, accommodation and all those things. We have one small expense to place the trade and that’s it.
Forex trading used to be the domain of only large banks or very large investment groups, with the smallest trade being allowed of $100’000 (that’s USD and not Zimbabwean Dollars!). This puts it out of reach of the general population.
Over the last 10 or 15 years the Forex market has had several changes which allows people to trade with very small amounts. Some brokers offer as low as $25, these accounts are not recommended and we’ll get in to that later as well.
It’s good that you’re reading this and that you are interested in Forex trading. However, it’s not for everyone. You must be aware that there is always an element of risk when placing a trade. And secondly, anyone offering a 2 or 3 day course with no follow up program is just making a quick buck from you. I could not learn your job in 2 or 3 days, so how can I expect you to learn mine ?