How do you make money on the Forex?


How do you make money on the Forex?
The Forex, or any other exchange is a way to make (or lose) money. The way to do it is the same no matter where or what you trade. You can buy something which you believe will appreciate (be worth more) and sell it when it does, or sell something which you don't currently own, but which you believe will depreciate, and buy it (to "cover") when it does. In either case, you have to add in the "spread" which is equivalent to the commission in stocks and bonds, and which is part of the cost of doing business.
The Foreign currency exchange is a volatile market with ordinarily very small movements in valuation. What this means is that the exchange rate is figured to four decimal places (.0001 is called a "pip") and can move as little as one "pip" at a time. The movement of one pip is not sufficient to make money, though, since the spread, (your overhead), can be as much as several hundred "pip" and you pay the spread both buying and selling.
While the math is a bit on the difficult side, the computer programs which most market-makers will supply you with, free with your subscription, will do all the calculations for you. Another interesting aspect to the trades is that normally trades start at 1,000 and progress rapidly toward and over 100,000 and sooner or later even one pip is a lot of money.
Because we are almost always dealing with very small shifts in the exchange rate, and because the market is tuned to a day-trading mode, research is the key. If you have been filling your car with gas at fairly regular intervals over the past several months or years, you have probably noticed some fluctuation in the price per gallon. There were some days where the time of purchase could mean as much as a five dollar difference in a tank of gas. Think of a market which could fluctuate in the same manner, and with the same political, weather, and other market pressures working on it. Now add to that market one more factor, and that is that at the end of a twenty four period, you are obliged to clear your trades. If you bought, you must sell, and if you sold, you must buy.
If you are getting excited at the prospect of you against the world in this game of thousandths of cents, and your palms are getting sweaty with anticipation, this game called Forex may be for you. If you are overcome by a fear and queasiness, don’t even think about it.