Forex Trading: Get Some Extra Cash In Your Pocket
There are many ways to earn extra cash on the internet but one of the most popular is forex trading
. Forex is simply short for foreign exchange. This is the exchange of foreign currencies on the international currency market.
Currencies are exchanged for many reasons. Anybody wanting to travel in a foreign country will need to change money, and any business that wants to import or export goods will need to deal with other currencies.
So how do people make money with currency trading? Well, if you travel much, you will know that the exchange rate of one currency against another is changing all the time. Because of this, it might happen that you could profit from foreign exchange by chance.
For example, you might be planning a trip overseas so you change some money. Then your plans change so you don't go. You change the currency back. In the meantime, the value of the foreign currency that you had will probably have changed. You will not get back exactly the same amount that you paid for it. Since your bank will have charged commission, in most cases you get back a little less. But if the value of that currency had risen by a good amount, you might get back more than you paid. In this case you would have profited on the exchange.
Trading currency is a little like this. However, when you are involved in forex trading you never actually see the foreign currency that you are buying. It just shows as figures in your account with your broker.
What is more, you would be dealing with much larger amounts. Forex trading uses 'leverage' which means that you can control a large deal with only a small percentage of the value of the currency involved. All you need to put up as an investment is about 1% of the currency you are buying, or sometimes less. Currencies are relatively stable, so the value is not likely to change by more than this amount in a short time. Therefore, your broker in effect loans you the rest.
This means that you can trade currency worth $10,000 with $100. Or if you use 200 times leverage, with just $50. This enables large profits to be made with a small account balance. This is the main attraction of forex trading for most people.
Of course, like any speculative investment, forex trading is a risky business. It is better not to trade with money that you need for anything else, because it might be lost. Fortunately, most brokers will allow you to begin with a demo account. This allows you to start trading with 'toy' money, so you are learning to trade profitably on the live market but without any risk.
It is best to continue to use a forex demo account until you are confident of being able to make profits consistently. At that point you can begin to earn extra cash by using real money to trade on the foreign exchange market and that is when you will begin to trade for real and that can be a very exciting time indeed.
by: James Roshwood
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