Dirty Forex Secrets

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Forex for Dummies

Ok, here is the bonehead 101 class on Forex trading you’ve been looking for. Forex for dummies is in session. Ok, let’s say you had a some US dollars (USD) in your hand and you wanted to trade it in for one unit of European money which is called  a Euro (EUR). You go to your local bank or currency exhange place at the mall to make your trade. You look at the exchange chart and find out that the current rate of exchange for US Dollars to Euros looks something like this EUR/USD=1.4000. What the heck does that mean? That means that one Euro equals $1.40 in US Dollars. So one Euro would set you back $1.40. So, you cough up the amount and buy yourself a Euro. Congratulations! You just made a foreign currency exchange or “Forex” for short.

Now, let’s say after a little while that the little Euro in your hand went up in value on the Forex chart like this: EUR/USD=1.6000. Now your Euro is worth $1.60 in US Dollars. You can now exchange that Euro back for US Dollars and make yourself a cool 20 cents in profit. Now I’m sure you can imagine if you bought a whole bunch of those Euros and then sold them back for Dollars. Since this is a Forex for Dummies report, I won’t go into too much math. But that’s how international banks have been killing it for years. Only recently due to the internet has that power been handed to you and me.

Now to break down some shop-talk that gets thrown around in the Forex world and let’s do it Forex for dummies style. The EUR/USD example above is what is known as a “currency pair”. It pairs one nation’s currency against another. Other common currency pairs you would see would be the Japanese Yen against the US Dollar or USD/JPY or the US Dollar against the Great British Pound or GPB/USD. The first currency in the pair is the more expensive of the pair and is known as the “base currency”. The following currency is  known as the “counter” or “quote” currency. And of course the five-digit number that follows is how much of the quote currency it takes to trade for the base currency. Each movement in a currency (like when our Euro whent up in value) is known as a “PIP” or Price Interest Point.

Of course, the whole trick in trading Forex is to buy when a currency level is low and sell it when it is high. You just have to be able to spot a good trend, ride it and sell before it goes down again. When you work with a real Forex account through a broker you are actually leveraging more money than you actually have in your account. This makes Forex trading potentially very profitable but also very risky. You could lose everything with a few small movements. That is why you should learn the ropes from a veteran successful trader and then set up a free demo account at a online service like Easy-Forex before you start playing with real money.  So I hope this Forex for Dummies report was helpful and I know you’re not a dummy because you made the smart decision by stopping here. Now, don’t forget to grab your FREE ebook in the upper right hand corner.