What is FX or Forex Trading?

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Understanding the FOREX Market

source: http://www.forextrading.net

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.

ACTION STEPS

Still confuse? Go to the internet and research about forex trading. Also check out our sponsor, WorldWideMarket.

WorldWideMarket Online Trading

source: http://www.worldwidemarkets.com

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. 


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Financial Freedom Advocate About the blogger

Louis Delos Angeles is a Certified Public Accountant, blogger behind Investing in Philippines, and author of Investing in Stocks: Preparing for the future small amount at a time. Check him out in Google+ Learn more about Louis and his financial freedom advocacy here.

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14 comments for “What is FX or Forex Trading?

  1. ruperto nambio
    August 1, 2013 at 1:16 pm

    My question is, why does a certain currency fluctuate or appreciate against versus another currency, what causes it to move upward or downward?

    • August 1, 2013 at 5:18 pm

      Good question Ruperto.

      Well just like stocks or any commodity the price fluctuates primarily due to the supply-demand relationship. A demand for a certain currency rises when people think its value as reflected in country of that currency’s economy is strengthening. In our example when the US economy weakens the USD – PHP rate goes dow thus we need a fewer number of Peso to buy the Dollar. The USD – Peso rate goes up when US economy strengthens because people think such economy will go on and thus they are willing to buy Dollar as storage of value. When such demand keeps on going the need to increase the rate in order to force people to sell their dollars so that buyers can store the value they are expecting in the future.

      I hope I have answered your question Ruperto.

  2. August 9, 2013 at 7:03 am

    Investing in online trading is a great alternative to achieve good profits, online forex trading business is very effective if you have knowledge and tools to operate.

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  4. January 14, 2016 at 4:48 pm

    Good day. I’ve been wondering how the fund investment flows in the Forex Market. I’m a little bit familiar in Forex trading since I’ve attended few seminars on this. But my concern and worries is how’s my fund investment flows before I start the Forex Trading. I understand that there are a few things that needs to comply before you start trading. But how sure that my investment fund is safe once I send this to the forex market institution. Can you give me a little background on how I can trace my funding flows upon sending it t the Forex market.

  5. Joseph
    April 11, 2016 at 6:17 pm

    Great to know that there is a huge interest in Forex Trading here in the Philippines!

    I’d like to help you get started in Forex Trading.

    Do leave a comment if you are interested.

    • arby
      May 17, 2016 at 9:50 pm

      Hi I wanted to learn more about Forex trading and it seems that there are less articles about this topic unlike with stocks or other investments. I hope to find some more information about FX,

      • Asani
        May 3, 2017 at 3:14 am

        There are a lot arby, just ask google

    • David Dueñas
      June 27, 2016 at 7:39 pm

      Hi. I have no experience with this kind of investment and I am afraid to do money transactions over the internet cause of possible scams. I would like to learn more about this and I would really love to see my hard earned money grow. Can you help me get started?

      • July 3, 2016 at 11:43 am

        Hi David,

        Apologies for not replying to your message. FX trading is done mostly online and in the Philippines these are not covered by our laws since FX trading involves a wider investing community. Internationally there are accreditations of FX brokers. You have to really choose one that you can trust. IN the Philippines there are groups that help in facilitating learning FX trading. You can search for PAFTI in the FB groups and also some trading private groups in FB for discussions.

        I hope this helps David. YOu really have to do your research about the FX brokers which are mostly US/SG/HK/and Europe based. Again this is a highly volatile market and investing in these involves high risk so be aware of the disclaimers. Dont invest if you are yourself not educated and prepared enough to do trades. You can check out some simulated platforms and do attend seminar or live trainings to fully grasp this. Then practice using the training modules that use live trading data to get you familiarize on the speedy trading n forex.

        Hope this helps David.

        • David Dueñas
          July 3, 2016 at 12:17 pm

          Thanks for the email. I will make sure to learn everything I will need for effective trading. All the best.

  6. David Dueñas
    June 27, 2016 at 7:33 pm

    Good day. I would like to learn more about this kind of investment and how can I start. Do you conduct seminars here in Batangas city and can I do it even if I don’t have access to internet all the time?

    • Asani
      May 3, 2017 at 3:17 am

      Hi David, internet is a must

  7. Asani
    May 3, 2017 at 3:29 am

    I have been trading for average 2 years now, I can not say it is easy but I can say its worth it
    just keep working hard and seek for improvement every day, discipline is the key.

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