How to Make Money with Forex Trading

So how do you make money with Forex Trading?

Forex Trading is a mechanism of trading one currency with another currency at the current trading rate. In a simple word it is a buying or selling one currency to another at a particular rate and then close trading by selling it at higher rate or buying it at lower rate to make profits. Exchange currency are trade in pairs eg GBD/USD, EUR/USD, USD/JPY etc
Here's a simple explanation:

Say you want to exchange US Dollar to Euro currency at exchange rate of 1.3500. This means that you are going to trade EUR/USD currency pair. In forex term, the first currency indicates that it has stronger value so in this case EUR is stronger than USD . In this matter you require 1350 dollars ($1350) United States Dollars (USD) in order to buy Euros at 1000 Euros (€1000). Once transaction is done, your money value fluctuate immediately according to the market demand rate. Since you are buying EUR , in order to make profit you need to close trading by selling it back at a higher rate than your initial buying rate ie 1.350. Assuming the next 20 minutes this pair exchange rate has risen to 1.3750 .

Imagine if you sell the EUR back after holding it for 20 minutes you will be getting a profit of USD 200. That is 20% profit for just 20 minutes. So this is how people are making money with trading forex.The above scenario is profit, how about if it goes the other way round. Definitely if the EUR/USD rate drops your EUR value will also be lesser and if you decided to sell it to prevent more losses should the rate drop further you lose the same amount just in 20 minutes. Therefore please be reminded that Forex is also a risk business.

So let’s take a look at another example using larger values.For years the US Dollar was much stronger than the Canadian Dollar. United States citizens could go to Canada and get about $1.25 Canadian (CAD) for every 1 dollar (USD) spent.So if a person had the vision to see how much the Canadian Dollar would gain on the UnitedStates Dollar (and some people did) then that person would be very rich today.

This is because as it stood toward the end of 2007, 1 US Dollar ($1.00) would only fetch about 1.01 of Canadian. And earlier in the year it would have fetched even less than that. For a time the Canadian Dollar was worth more than the US Dollar.So let’s put this in real terms.

Say a person decided to exchange 10,000 US Dollars ($10,000) for Canadian currency a couple years ago. The person would’ve gotten 12,500 Canadian Dollars ($12,500). That’s calculated by taking the 1 US Dollar ($1.00) equal to $1.25 Canadian. So you multiply the 10,000 by 1.25. That’s 10,000 x 1.25 = 12,500.

So after holding onto the currency for two years, the Canadian currency is then exchanged back to USD at the current exchange rate, which is now 1 US Dollar ($1.00 USD) equals 1.01 Canadian ($1.01 CAD).

So now exchanging the money back, the person would get 12,376.23 ($12,376.23 USD). That’s12500 / 1.01 = 12,376.23. That’s a profit of 2,376.23 ($2,376.23 USD). Not a bad return for twoyears. That’s over a 20% return!

Now imagine you invested one hundred thousand ($100,000) or a million dollars ($1,000,000) a couple years ago. Now you’re talking about making over 23,000 ($23,000 USD) or over 237,000 ($237,000 USD) in just a couple years.