FOREX TRADING
My ex-girlfriend Saa-rah got divorced in 2011, that's just five short years ago. She had worked for a large banking group as an IT manager in their credit card division for almost 25 years. She earned good money and managed to buy a very beautiful and expensive home in a fairly upmarket golf estate. Unfortunately her marriage was doomed to fail since she married him on the rebound after we parted company, yet through all that time we remained dear friends. Her husband was a lazy opportunist, essentially a bum who never did a stitch of work in his life except swindle people out of their hard earned cash. Her husband essentially screwed her over and she got a really raw deal. The decree of her divorce stipulated equal division of assets and her share of the proceeds after lawyers expenses was a mere R187 844.00, though still a substantial amount of money yet certainly not enough to buy a decent car let alone a small house.However, she was money savvy. She sold her Volkswagen Polo, bought a bike and moved in with her sister who lived in a flat. They shared all their household expenses so that she Saa-rah could start over. After doing much research on Forex and doing an online course with one of the Forex traders, she invested a total of R200 000.00 in USD. In 2012 the USD/ZAR = 7.2510 and ever since behaved very poorly. The rand slipped several times over the past few years and was especially susceptible to President Jacob Zuma's political antics. The most recent one was when Jacob Zuma abruptly fired his finance minister Nhlanhla Nene and replaced him with David Van Rooyen, who was a relatively unknown lawmaker with little experience in government causing the rand to crashed through the R15/$ level. By replacing him with Pravin Gordhan the rand recovered slightly.
However two of the three major credit ratings agencies downgraded South Africa to just one notch above “junk” status, citing over-spending, declining business confidence, and weak economic growth as justification. In 2013 the South African rand was ranked as the 18th most-traded currency in the world. Surprisingly, today South Africa accounts for only 0.3% of the world’s daily foreign exchange market turnover, and accounts for 1.1% of worlds daily currency trading. Be that as it may, just yesterday morning Saa-rah cashed in her chips at USD/ZAR = 14.23. Believe it or not she sold her USD making R6.979 x 200 000 which amounts to a cool R1,395 800.00. Yes you read right, One cool million three hundred and ninety five thousand, eight hundred rands. Ostensibly she earned herself 6.9 years worth of income based on her current salary and she is contemplating to reinvest. This is one of the good stories.
Steven Lang ex-principal of Lexington Collage also traded Forex but he wasn't that lucky or intuitive. He traded EUR/USD over a short term and lost half of his retirement pension in the process. This is one of the sad stories. Forex is not a get rich quick scheme but a strategic money making endeavour. It is reliant on political scandals, turmoil in foreign markets, nuclear project, arms deals, etc. Staying abreast of the issues that affect the currency you trading can spell the difference between making a profit or loss.
A CRASH COURSE IN FOREX TRADING STRATEGIES
In the forex market, you buy or sell currencies. Placing a trade in the foreign exchange market is simple. An exchange rate is simply the ratio of one currency compared against another currency. The object of forex trading is to exchange one currency for another with the expectation that the price will change, so that the currency you bought will increase in value compared to the one you sold. You would buy the pair if you believe the base currency will appreciate (gain value) relative to the quote currency. You would sell the pair if you think the base currency will depreciate (lose value) relative to the quote currency.
Example:
EUR USD - You purchase 5,000 euros at the EUR/USD exchange rate of 1.1800
Two weeks later, you exchange your 5,000 euros back into U.S. dollar at the exchange rate of 1.2500
EUR 5,000 x 1.18 = US $5,900
EUR 5,000 x 1.25 = US $6,250
You earn a profit of $350
How to Read a Forex Quote
Currencies are always quoted in pairs, like GBP/USD or USD/JPY. The reason they are quoted in pairs is because in any foreign exchange transaction, you simultaneously buy one currency and sell another.GBP/USD = 1.4995
The first listed currency to the left of the slash (“/”) is known as the base currency (in this example, the British pound), while the second one on the right is called the counter or quote currency (in this example, the U.S. dollar). When buying, the exchange rate tells you how much you have to pay for one unit of the quote currency in order to purchase one unit of the base currency. In the example above, you have to pay 1.4995 U.S. dollars to buy 1 British pound. When selling, the exchange rate tells you how many units of the quote currency you get for selling one unit of the base currency. In the example above, you will receive 1.4995 U.S. dollars when you sell 1 British pound.
The base currency is the “basis” for the buy or the sell. If you buy EUR/USD this simply means that you are buying the base currency and simultaneously selling the quote currency.
Long/Short
First, you should determine whether you want to buy or sell.
If you want to buy (which actually means buy the base currency and sell the quote currency), you want the base currency to rise in value and then you would sell it back at a higher price. In trader’s talk, this is called “going long” or taking a “long position.”
Just remember :- long = buy.
If you want to sell (which actually means sell the base currency and buy the quote currency), you want the base currency to fall in value and then you would buy it back at a lower price. This is called “going short” or taking a “short position”.
Just remember :- short = sell.
What is a currency pair?
How to Make Money Trading Forex
Know When to Buy or Sell a Currency Pair
What is a Pip in Forex?
Forex Trading Tips
Impress Your Date with Forex Lingo
Types of Forex Orders
Forex Trade Your Way to Success
Forex Trading is NOT a Get-Rich-Quick Scheme
How to Make Money with Forex
What is a Lot in Forex?
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