As they, man is a greedy animal and when the stocks of America
aren’t enough for these traders, they start dealing with international
commodities, some of which is Forex
.
.
Forex or FX stands for foreign exchange. In Forex trading
basically we focus on trading in currencies. Trading in currency is just
like trading in stocks. In this you buy one currency when that currency is at
its downfall and you sell that currency when the value of that particular
currency is at its peak. This is just the basic way you trade in foreign
exchange.
If a person carefully notice that in Forex we always deal in
currency pairs for example 1 USD is equivalent to 100 yen at some point of time
but after a day you can also notice that a dollar has gone down and now 1 USD is
equivalent to 80 yen. And the reason for this downfall could be anything. Let’s
say there is some political issue. Now what you actually do is you buy
some dollar and keep it safe with you till the time the current political issues are
over.
Let’s say you bought 5 USD. Now, after some time the US dollar
rises again and now 1 USD is equivalent to 110 yen. At this time you feel that dollar
won’t rise more, remember such decisions should be planned and strategized with
outmost research.
These reasons are often affected by the growth of the country, the
political unrest, government and foreign affairs to name a few. So in that
scenario you sell your 5 USD for 550 yen. Now we can see that these things
always occur in currency pairs [Dollar(USD)/Yen].
Now if we carefully notice what we have gained from this, in the
beginning we had 5 USD which was equivalent to 500 yen but now we have 550 yen,
that’s a 10% profit. This is how Forex works. I feel the best strategy would
be to invest in US dollar as US economy is largest in the world, US is the
world's only military superpower and the US dollar is the reserve currency of
the world.
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