Forex Trading – Make Money Through Fluctuating Currency Prices

Forex trading is not rocket science. It is simply taking advantage of the fluctuating nature of the currencies to make profit. If you know how to do this, you can make millions. If not, you can still make millions, but in debt!

Using Basic Economic Sense

This is simple economics. If the supply of goods is high, the price of those goods will rise. So, if the supply of certain currency is high, you need more of that particular currency to buy other currencies. This actually indicates that the currency, which was in high supply, is devalued.

You trade currencies in the Forex market. Do not always expect to get currencies in the same quantity. The price as well as the quantity of currencies of different countries tends to fluctuate. It is this fluctuation that can change the wheels of your fortune for good or bad. Factors that influence currency supply include foreign investors, export companies, central banks, and speculators present in currency trading.

How Foreign Investors And Export Companies Affect Forex Trading?

Suppose a foreigner decides to invest in your currency. For that, he or she needs to convert their currency into your local one. When they do that, the supply of their currency increases in the currency market and the supply of your country’s currency decreases. This means that the foreigner’s currency saw depreciation in its value while your currency saw an appreciation in its value.

The same thing happens when export companies trade their goods to a particular country. They need to undergo foreign exchange. Say, a company X in England exports goods to Canada. The company will receive their payment in dollars. The currency in dollars is useless back in England. So, the exporter needs to sell the dollars in the FX market to get pounds. This is forex trading alright. When the dollars enter the market, their supply increases and that of pounds decreases. As a result, the value of dollars depreciates and the value of pounds appreciates.

How Central Banks And Speculators Affect FX Trading?

The central banks, in order to raise the supply of currency, print more pounds. They have a certain amount of currency in reserve to release them in the market as and when required for regulating the currency market.

The world of forex trading is filled with speculators. The daily fluctuations in the value of currency attract them like honey bees to hive. They just cannot keep away from this. They are experts in forecasting what will happen next in the market. In fact, they are the ones who know how to make the most from such type of trading. Some can even predict fluctuations with extreme accuracy.

Forex trading is more of a skill than a trade. As you plunge deeper in this trade, you may realize that there is a definite pattern of fluctuations in the currency. But, it may not always be a patterned trade. Surprises and setbacks are always round the corner. So, keep your antennae up.