Does Forex Trading Really Live Up To All The Hype? | ForexGen

If you”ve heard of Forex trading (also known as foreign exchange trading), great. It’’s one of the hottest topics around right now and its popularity is growing. What is it, though, and how can you as an average trader make money in it?

Forex is also called “FX,” and both are short for “foreign exchange.” Foreign exchange doesn”t get a lot of press like options, stocks and commodities. However, foreign exchange is in fact the biggest market in the world and it can offer investors a huge opportunity for profit, done right.

When you trade in foreign exchange, you don”t trade in bonds or stocks. Instead, you trade in currency. Simply, you buy one currency and sell another. As exchange rates go up and down, you either make or lose money, depending on what you”ve traded.

With foreign exchange trading, you aren”t investing in a single company or group of companies, as you might with mutual funds, for example. Instead, you”re investing in a nation’’s economy. You are betting that the overall economic health of one nation will get better as compared to that of the second nation in your “currency pair,” or the pair of currencies you are utilizing to trade.

As an example, let’’s say that you are dealing with the Japanese yen and the US dollar. Your research seems to tell you that the US dollar is undervalued and will increase in price, and at the same time, the Japanese yen is going to lose value. With this scenario, you would execute a trade so that you buy US dollars and sell Japanese yen. If you are right and the exchange rate rises, you make a profit. If you”re wrong and the exchange rate falls, you”ll lose money.

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