Forex is short for Foreign Exchange or Foreign Currency Exchange. Forex Trading is a type of business that uses the fluctuating nature of different currencies, trades efficiently, and makes a profit from it. Basically, a person can buy a currency when it’s low in value and sell when the value is high, and if you know the tricks and techniques, you can walk away with a hefty profit within a few hours.
The Fundamentals of Forex Trading
On the fundamental level, you will need two currencies. We call this a “Currency Pair“. For example, you select US Dollar (USD) and Japanese Yen (JPY). When trading, you are actually buying one currency and selling the other. The first one is called “Base Currency“, and the second one… “Quote Currency“
Say, as of now, 100 USD is worth 15,000 JPY, but you think that after a few hours, JPY will get stronger (Increase in value) against USD. So you buy the 15,000 JPY and wait for it to rise. After a while, you sell the 15,000 JPY and get 110 USD. You have a 10 USD profit in a few hours.
If you need to understand more, we encourage you to read our article “Forex Trading Basics: A Starter Guide“.
How to Know which Currency will Increase/ Decrease in Value?
This is where the trick is. A lot of people think it’s just speculation. Many others think it’s a gamble. That’s why so many people are not interested in Forex Trading. The truth is, this is an educated guess.
Currencies are just like any other commodities. It’s a matter of supply and demand. The more demand there is, the more value it has. The New York Stock Exchange opens at 9:30 am EST. Therefore, the demand for USD is most likely to increase. At the end of the day, at around 5:00 pm EST, the demand stops or goes down.
On the other hand, Japan and other markets in Asia open at 7:00 pm EST. Therefore, you can speculate, quite rightly, that the value of JPY will increase at that time. Now, it’s up to you to take advantage of that knowledge and choose the best time to buy JPY and sell your USD and vice versa.
Can anyone do this business?
Obviously. It was difficult before, but in this day and age, almost anyone with a smartphone can do it. However, that does not mean that everyone should. There are a few unknowns. The value of a currency doesn’t only depend on the market opening. It also has something to do with the total economic activities of a country. This is a lot more difficult to predict.
Yet, if you look at the charts (Graphs) long enough, you start to develop a natural instinct for how a currency behaves.
Why don’t many People Do it?
The number one reason is fear. Fear that it is a gamble and may not pay off. People feel a lot safer with their 9-5 jobs. You work, and you know that at the end of the week (Month), you will get paid. Forex Trading may not guarantee that.
The second reason is the unknown factors that can unexpectedly cause a currency to decrease in value.
The third and final reason, funny enough, is the jargon. Some beginners get really motivated to change their lives and financial situation, and then when they enter a trading site, they see a lot of flashing letters and numbers that they don’t understand, so they decide, “This is not for me“.
Best Forex Trading Tips for Beginners
If you are a beginner, here are a few steps to start:
- Don’t quit your regular job/ business.
- Learn the basics first. This is not a get-rich-quick scheme.
- Use simulation tools/ demo accounts. Do not use real money.
- Start small. Do not invest all your savings.
- Continue learning and never quit.
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Is it Worth it?
Definitely. When we talk about financial freedom, this is what it means. A regular job in the Philippines won’t get you there. Even if you work hard and get a promotion and a raise after three years, it will not help because by that time, your expenses will also have increased. If you try saving money by living below your means, how much can you save per month, and how much will that be in 10 years?
But imagine this. What if you could invest 5,000 pesos and make it grow 1% (50 Pesos) in 1 hour? Now, take the 5,050 and make it grow another 1% in the second hour. Your money will be 5,100.50. Come back the next day with 5,100.50 and trade for another 2 hours. This is called exponential growth. In one year, at 1% growth and only for 2 hours a day, you will have 176,700.00 pesos.
Yes, you might lose some money while learning, but is it worth it? You decide.
Join us and let us show you the way.
