Did you know that you can find a market that is available 24 hours a day? The market is called Forex market and if you go there, you can’t find services, commodities and goods. The Forex market is the place where different kinds of currencies are traded. In every trade, two currencies are involved. For example, you can sell your Canadian dollars for Euros; or you can pay Japanese Yen for US dollars. Forex rates or exchange rates can change unexpectedly. You need to monitor these exchange rates in order to determine if the price of a certain unit of currency increased or decreased.
Changes in the Forex market usually occur swiftly and so it is important for traders to keep track of the market. Political and economic events can influence the modifications in the Forex market. If you want to determine whether you’re gaining or losing in Forex trading, this article can help you with the computations.
The Forex investment is greatly impacted by the exchange rate and in order to understand the relationship between the two, you should also be familiar with Forex quotes. Like the currency pairs, Forex price quote can be found in pairs. Here is a very good example:
- Suppose the currency pair is USD (US dollar) and CAD (Canadian dollar).
The Forex quote for this pair is USD/CAD= 170.50; this is interpreted as ‘every one US dollar is equivalent to 170.50 CAD. The currency found at the left side is known as the base currency and it is always equivalent to 1. The currency found at the right side is called counter currency. The more powerful currency is always the base currency and in this case, the USD. The Forex quote’s central currency is USD and so you can find it in most Forex quotes.
How can you identify if you’re earning revenues or not?
You can use another example.
- This time use EUR to USD. Presuming that the Forex rate is 1.0857; in this example, the USD is the weaker currency. If you bought 1,000 Euros, you will need to pay $1,085.70. After a year, the Forex rate was at 1.2083 and this implies that the Euro’s value improved. If you decide to sell the 1,000 Euros now, you will get $1,208.30; now, in this financial transaction, you gained $122.60. What if the Forex rate a year after was 1.0576? This means that the Euro’s value deteriorated. If you still decide to sell the 1,000 Euros, you will only get $1,057.60 which means that you lost $28.10; did you get it?
Forex trading includes a lot of risks just like mutual funds and stocks. The fluctuations in the exchange market are responsible for such risks. Low level risks like government bonds in the long-term can give returns but are quite low. If you want to get higher returns, you need to invest in Forex trading but you need to face greater level risks.
You must set monetary goals for the short term, as well as for the long term. By doing so, it will be much easier to balance the risks involved and the security. You will be able to conduct your trades with ease and convenience. Make use of all the available Forex trading tools so that you can make wise and profitable trades. After reading this article, you can already calculate if you’re getting profits or not.