What is Forex?

Forex trading is speculation on the foreign currency exchange rate. You have to decide in what direction the exchange rate will go and invest in this direction. The Forex market shows the highest financial activity, with up to 4 billion dollars traded a day. To invest in the Forex market is easy; you have to decide what foreign currency exchange rate will go up or down and invest according to that direction.

To determine trends in currency exchange rates, there are two main methods: the technical analysis and the fundamental analysis. In the technical analysis, you can learn the direction of a specific currency exchange from exchange rate charts. These charts can give you information on currency fluctuations, what happened to the currency exchange in the last hour, day or month. By studying its behavior, you can speculate as to the direction a currency exchange rate is taking.

In fundamental analysis, prediction of currency rates is based on viewing the political and economic conditions of the country you are interested in. For example, in the U.S. every month, when the federal bank changes the interest rate, there is a direct impact on U.S. currency. In the analysis section, more information will be provided.

Why the high interest in investing in currency rates? To invest in the stock market, you would have to learn about the company you are planning to invest in, invest a large amount of money and wait a long time to see profit – if at all. In the Forex market you don’t have to wait a long time to see profit; even after one hour or one day, you can make a considerable profit. And you don’t need a large amount of money to invest due to the leverage system in this market –which, with only $100 in your Forex account, gives the strength of a $10,000 currency investment.

How does this work? If you invest $100 today on the U.S. dollar against the Euro and the dollar goes up one percent, you earn $1, not the profit you seek. With the leverage that the Forex trading companies give you, your money is multiplied by 100; that is, $10,000 for $100 you invest. When the market is up one percent, you have earned $100 – 100% of your investment. You can earn with no limit and lose only up to your initial investment or even stop your loss at $50. For example, if you invest $1,000 and stop loss after $100, and give instructions to take profit after $500, at a 0.5% change of the currency, you can earn 50% of your investment and take risk on only 10%.

Official authorization of Forex trading in most developed countries ensures that this is a legitimate way to invest.