LESSON NO 18
How to Earn money
from Forex Trading
It is the most important question for new
traders as well as for old and experienced traders. If you don't know the art of earning profits
from Forex Trading then this nothing else but just a waste of time and money to
indulge in Forex Trading. So let's learn
how can we earn money from forex trading.
In forex trading either a currency is
bought or sold. For example if price of
EUR/USD is 1.3033 and you assess that price of Euro will increase and you buy
this pair, after few hours as per your assessment and analyses price increases
and hits 1.3083 and you close your trade, you have earned 50 pips and if your
one pip is equal to 1 dollar then you have earned 50 dollars from one trade.
Likewise, GBP/USD price is e.g 1.6087 and
you evaluate that price of pound will decrease and you sell that currency pair
and after few hours its price decreases and hits 1.6037 and you close your
trade, you have earned 50 pips and if your one pip is equal to 1 dollar then
you have earned 50 dollars from one trade.
How to read a
Currency Pair:
GBP / USD : 1.51258
Base Currency / Quote Currency
Currency at the left side is called base
currency while the currency at right side is known as counter or quote
currency. During trading base currency
is kept in mind for example in currency pair GBP / USD if you want to buy you
will buy GBP and if you want to sold you will sold GBP.
What is Long or
Short: If
you intends to buy a currency pair I mean if you are going to buy a base
currency it will called Buy or Long and if you intends to sell a base currency
it will called Sell or Short.
Things to Kept in
Mind during Forex Trading: Following important things are to be
kept in mind while executing forex trading.
Before starting any trade, market is
analyzed, there are two main types of analysis:
Ø Fundamental Analysis
Ø Technical Analysis
What is Fundamental
Analysis: We
will try to learn with following few examples that what is fundamental
analysis:
Examples of
Fundamental Analysis
For a currency pair EUR/USD, if we see
that there is increasing ratio of unemployment in USA, GNP is decreasing or
there is downfall in exports then it means that dollar has become weaker, if
dollar is weaker it means Euro has become stronger with regards to dollar so
definitely we will buy Euro (I mean EUR/USD Pair) and if the situation is
against (employment opportunities are increased, GNP and Exports are also
increased) the it means that dollar has become stronger and Euro has become
weaker so in this case we will sell EUR/USD.
