How do you make money in Forex?



How do you make money in Forex?
I am new to Forex and want to know the basics. Currently, as of 4/14/2013, the euro/usd = 1.3103.

If I open a Forex account and buy $ 1000 worth of euros at the above exchange rate, would the below assumptions be correct?

1. I would have 1310.30 euros.

2. If the euro/usd exchange rate decreases to 1 and I convert the euros back to dollars, I make $ 310.30.
I’m already trading stocks and I am consistently profitable.
I too lost money trading stocks when I started out. But I made it all back.

Best answer:

Answer by KIRKUK
you really need to get a strong grasp of Forex before opening an account ..here’s a good site…http://www.babypips.com/

Know better? Leave your own answer in the comments!

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2 Comments


  1. jj (October 16th, 2013 at 2:57 am)

    same as everything, buy low sell high.

    your example is backwards. $ 1000 in eurusd= 1000/1.3103= €763
    if you bought $ 1k in eurusd @ 1.3103 and it went to 1 you’re -.3103. = 763*.3103 = $ 236.81 loss

  2. David (October 16th, 2013 at 3:24 am)

    Price in forex is always measured in cross rates. One currency is always relative to another. You are trading currency “pairs.” If you buy the EUR/USD pair, you are long the Euro but also short the USD. You are simply betting on the price change of the pair, like a stock or a commodity. If you buy the EUR/USD pair, you make a profit if the euro strengthens more than the USD and/or if the USD weakens more than the euro.

    1.EUR/USD – Euro/U.S. Dollar
    2.GBP/USD – Great British Pound/U.S. Dollar
    3.USD/CHF –- U.S. Dollar/Swiss Franc
    4.USD/JPY –- U.S. Dollar/Japanese Yen
    5.USD/CAD –- U.S. Dollar/Canadian Dollar
    6.AUD/USD – Australian Dollar/U.S. Dollar
    7.EUR/GBP – Euro/Great British Pound
    8.EUR/JPY – Euro/Japanese Yen
    9.EUR/CHF – Euro/Swiss Franc
    10.GBP/CHF – Great British Pound/Swiss Franc
    11.GBP/JPY – Great British Pound/Japanese Yen
    12.CHF/JPY – Swiss Franc/Japanese Yen
    13.NZD/USD – New Zealand Dollar/US Dollar
    14.EUR/CAD – Euro/Canadian Dollar
    15.AUD/CAD – Australian Dollar/Canadian Dollar
    16.AUD/JPY – Australian Dollar/Japanese Yen
    17.EUR/AUD – Euro/Australian Dollar

    NOTE: Of the above 17 currency pairs, six of them are deemed the “major currency pairs” in the FOREX market because they account for about 80 percent of FOREX transactions:

    1.EUR/USD – Euro/U.S. Dollar
    2.GBP/USD – Great British Pound/U.S. Dollar
    3.USD/CHF –- U.S. Dollar/Swiss Franc
    4.USD/JPY –- U.S. Dollar/Japanese Yen
    5.USD/CAD –- U.S. Dollar/Canadian Dollar
    6.AUD/USD – Australian Dollar/U.S. Dollar

    As you can see, there is a currency on the left and one on the right. The one on the left is referred to as the base, and the one listed on the right is known as the cross. The format, once again, is as follows. BASE/CROSS, or EUR/USD. The EUR is the BASE and the USD is the CROSS.

    TERMINOLOGY:
    •PIPS- Price Interest Point. This is the smallest unit price for any Foreign Currency.
    •LOT- A lot of currency is one denomination for a trade (100K or mini account). This is similar to purchasing one stock or one contract in the futures market.
    •LONG to buy
    •SHORT to sell
    •BID-The price at which you sell
    •ASK-The price at which you buy

    Price Interest Point – (PIP) – or more recently, Percentage In Point
    Profits are made in the FOREX by gaining PIPS. A pip is the last digit from the decimal point. This value is 1/100th of a cent. You may now be asking yourself, how do I make money off of 1/100th of a cent? The answer is leverage. The FOREX market is highly leveraged and should be respected. That said, it can also provide for a tremendous return on your investment. The average leverage in the FOREX is 50 to 1. Basically this indicates that for every dollar you invest in a trade you are controlling $ 50 of value.

    Calculated PIP
    Calculated PIP – shows the Price Interest Point (PIP) or Point In Percentage value for the selected currency pair based upon your trading account margin. For example, a standard 1 percent margin trading account controlling $ 100,000 in currency would show the EUR/USD with a PIP value of 10.
    PIP VALUE-Fixed or Floating
    FIXED- When the USD is the cross currency (right side of the pair), the PIP value is fixed at $ 10 in a 100k account.
    FOATING- When the USD is the base currency (left side of the pair), the PIP value is based upon the exchange rate of the cross currency (i.e., USD/CAD.). Also, the PIP value is floating when the pair consists of foreign currencies (i.e., EUR/ GBP).
    LOT
    A lot is the normal unit of trading in the FOREX market. Trades are made in lot increments, similar to share increments in the stock market.


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