I am sure you already heard about currency trading which is more popularly called Foreign Exchange Trading or FOREX or FX for short.
Basically Forex Trading is the trading of two currencies. In the Philippines and for OFWs I guess the best well known currency we are handling is the US Dollar and the Philippine Peso.
What do we do when the value of US Dollar against the Philippine Peso fluctuates?
When the exchange rate goes up, meaning we need more Peso to buy the Dollar, we exchange or sell our dollar taking advantage of the additional number of Peso we can acquire for the same Dollar. Now on the other hand when exchange rate goes down, meaning we need fewer Peso to buy the Dollar, we buy the Dollar taking advantage of able to buy Dollar cheap.
That is how basically FOREX trading works(but to tell you the truth I am still confused with the way how you trade specially on what position you are in and with currencies I am not familiar with).
Disclaimer: This post is in connection to this blog’s sponsor, WorldWideMarket, who recently launch in the Philippines. We are currently testing the service using a practice account and the review and opinions stated are based on the on going review of the service.
But here is a guide I found out in the internet. To profit in the FOREX Market we got to buy when the exchange rate is going up and we have to sell when the exchange rate is going down.
Before I explain this further let us understand some stuff about FOREX trading.
In the stock market we trade a single stock or in the case of an ETF a basket of stocks but in the FOREX market we trade a currency pair. Currency pair has three parts namely base currency, counter currency, and the exchange rate. For example the US Dollar and the Philippine Peso might be seen as USD/PHP = 43.3. This means that 1 USD is equivalent to 43.3 Philippine Peso.
Now going back to our analysis when the USD-PHP exchange rate goes up from 42 to 43 the action we will make is to exchange our dollars to peso thus we are actually buying Peso by selling our Dollars and in the process we profited 1 Peso per dollar. Now on the other hand when the exchange rate goes down from 43 to 42 we will exchange our peso thus actually buying dollar by selling Peso and saves us 1 peso per dollar which is technically a profit. With these we can actually make money whether the exchange rate is going up or down as long as we take the right position. That is why we cans still apply our technical and fundamental analysis to determine the direction of the currency pairs trend and thus make profit.
Still confuse? Go to the internet and research about forex trading. Also check out our sponsor, WorldWideMarket.
They are a financial services technology firm which provides online trading and risk management solutions for Spot Forex, Gold, Oil, equity indices and other CFD instruments.
Take their survey by clicking the image in the sidebar and get a $25.00 to start with.