What is Forex Trading and How does it Works?

 

what is forex trading and how does forex trading works?

Hello friends, today we will know what is forex trading and how does forex trading work. Also I will tell you how you can make money from forex trading.

Friends, you must have known about trading, it is a type of business in which we earn by buying and selling shares of any company. But there are many types of trading, one of them is forex market or forex trading.

What Is Forex Trading

Friends, do you know that forex market is also called foreign exchange market or currency trading market. Just like we trade inside stocks in the stock market, we trade in currency in forex trading.

Companies use different currencies to buy goods from other countries. To buy these goods, they first need that local currency. Like when we go to foreign holiday, we exchange it in that currency, the only difference is that this company exchanges a lot of currency. So the exchange rates keep changing from currency exchange happening all over the world. This is how it works.

How Forex Trading Works


When a currency is exchanged, they have a certain price i.e. exchange rate and it is determined by the price loss, supply and demand of the currency. If there is a high demand for a particular currency, for example -

If many people or companies want to exchange their domestic currency with Euro, then the value of Euro will increase and its exchange rate will also change against other currency.You can use this principal to earn a profession here. Let us take an example to understand this.

How To Make Money From Forex Trading

Let us know how we can earn money from forex trading. Suppose you live in India and go to the United States for a holiday, then you will have to exchange Indian Rupee for US Dollar. At the time when you were going to roam, you got one US dollar for 70 Indian Rupees, so suppose you exchanged 35000 rupees, then you got 500 US dollars.


When you come back from usa to india after two weeks you still have 200 us dollars so in india you can't use dollars then you have to convert them back to indian rupees. But you have seen that the value of rupee which is against the dollar has changed as compared to earlier.


Now you have become 72 rupees against one dollar, so now you will get 14400 rupees of 200 dollars according to the current rate. If the exchange rate of the rupee against the dollar was 70 rupees as before, you would have got only 14000 rupees for 200 dollars. Basically you have earned 400 rupees here. So that's how forex trading works and that's how we make money from forex trading.

To earn money from the forex market, we buy a certain currency and hold it until its exchange rate fluctuates, and as soon as the exchange rate changes, we convert it back to our currency and earn profit from this process.

So hope you understand forex trading, I have been able to explain to you what is forex trading. See you in the next knowledgeable post.


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