How does Forex work and what is it? Earn money by exchanging currencies

June 10, 2020

Are you curious about Forex and want to learn what it is and how it works? You’re in the right place. In this article, we’ll explain Forex trading, its advantages, risks, and essential details you need to know.

What is Forex?

Forex, short for “Foreign Exchange Market,” is the largest and most active financial market in the world. It involves the simultaneous buying and selling of currencies. Unlike other markets, Forex operates 24/5 with no centralized location, and trades occur online via a global network of banks, traders, and brokers.

Can You Make Money in Forex Trading?

Yes, it’s possible to earn through Forex trading, but it’s not easy—especially in the long term. Success depends on understanding the fundamentals and applying the right strategies.

Before starting, it’s crucial to learn how the market functions, practice with a demo trading account, and familiarize yourself with the technical and theoretical aspects of Forex. For instance, Fortissio offers a demo account you can open in less than 30 seconds.

How Does Forex Trading Work?

Forex trading is the simultaneous buying of one currency and selling another. Currency pairs like EUR/USD (Euro/US Dollar) are traded, and their exchange rate shows how much of the quoted currency (USD) is needed to buy one unit of the base currency (EUR).

For example, if the EUR/USD exchange rate is 1.1230, this means 1 Euro can be exchanged for 1.1230 US dollars.

Is Forex Trading Suitable for Small Investors?

Yes, small investors can trade Forex using leverage, which allows them to control larger positions with less capital. However, leverage also increases risk. Forex’s high liquidity and low initial investment requirements make it accessible to smaller traders.

Advantages of Forex Trading

No Commissions: Most brokers charge through spreads between buy and sell prices.
Low Initial Capital: You can start with just a few hundred euros.
24-Hour Market: Forex is open 24 hours a day, 5.5 days a week, allowing for flexible trading.
Leverage: Traders can control larger positions than their actual investment.
High Liquidity: Orders are executed instantly, thanks to the large volume of trades.

How to Profit from Forex?

To profit from Forex, traders buy low and sell high (or vice versa). For example, if you buy 1,000 EUR/USD at an exchange rate of 1.1800, and the rate increases to 1.2500, selling would give you a profit of 70 US dollars.

Long and Short Positions

Long Position: Buying a currency expecting its value to rise.
Short Position: Selling a currency expecting its value to drop.

Main Forex Trading Strategies

Price Action: Analyzing price movements to make trading decisions.
Support and Resistance Trading: Focusing on price volatility at key levels.
Scalping: Quick trades aimed at capturing small gains.
News Trading: Taking advantage of market volatility after economic news.
Trend Following: Opening positions in line with long-term market trends.

How to Choose a Forex Broker?

Look for brokers offering demo accounts, low fees, and good spreads. Many brokers also offer contracts for difference (CFDs), enabling you to trade not just currencies but also commodities, indices, and stocks on the same platform.attaforma anche su azioni, indici e materie prime senza i costi di un conto titoli presso una banca e con la possibilità di fruire di leve finanziarie anche elevate (arma a doppio taglio, è sempre bene ricordarlo).

Credit: https://www.money.it/Come-funziona-e-cos-e-il-Forex-Guadagnare-con-lo-scambio-tra-le-valute