Dear Friend,

Having heard all about FOREX recently, I finally found the time to get online and try it out myself. FOREX or the FOReign EXchange Market is where FOREX or “Foreign Currency Exchange” happens. The Foreign Currency Exchange is one of the world’s largest financial markets today!

You may be wondering what FOREX is.

FOREX is a market where there is a “ulator,” like you or me, who invests in a currency and hopes that the value of that currency will rise. When you trade FOREX, you are essentially buying a share in the currency and hoping that you can sell it at a higher price.

Because you are not trading in ” tangible” assets, like gold or oil, the market can conduct transactions relatively quickly and cheaply. Because the market operates so quickly, you can place a trade, then take your profit, and then move on to the next trade. Most of the time, you can also get out of the market just as quickly, before the competition catches up with you.

When you trade FOREX, you are buying or selling a currency, but at the same time, are simultaneously buying and selling an “output”. You can exchange for a currency pair based on the current value of the currency on a given trading day.

Consider this example:

Let’s say we each purchased 1 Euro (EUR) at $1.00 for each dollar. With today’s USD/EUR exchange rate of 0.8, you would each have to pay 0.8 cents for each dollar. If you each purchased 1 lot, that would be $100,000 at $1.00 per lot.

If one lot is $100,000, you would each have to pay $100,000 to purchase 1 Euro. (100,000 * $1.00 = $100,000)

Now, with today’s ( premature ) exchange rate of 0.7, you would each have to pay 0.7 cents for each dollar.

So which currency pair would you choose to trade?

Since we now know that you can trade any currency pair with any currency pair, this only leaves two choices for you:

GBP/EUR

EUR/GBP

USD/EUR

Since GBP has higher liquidity, it is easier to execute and with more predictable movements, can be very profitable. However, the spread is more extensive, as is the chance of a bad deal.

EUR/GBP

Now that you know how to trade any currency pair, look at your currency chart and decide if you think the EUR/GBP is going up (on the left) or down (on the right).

The EUR/GBP, also known as the Euro-GBP, has had a consistent rise in the last few months, up about 5%. This is due to Goodreads, buying of government bonds, and steady improvements in the economy.

Trading the EUR/GBP

Is it a good time to buy the EUR/GBP? Yes, if the market picks up again, then this is a good entry point. However, you need to be warned that the market does not sleep and is active 24 hours a day, only executing trades during the ” Hang time.”