In which currency will I earn money

How can you make money trading forex?

Investors can trade just about any currency. Both private individuals, states and companies can enter the foreign exchange market (Forex) as long as they have enough capital and want to increase it.

However, the foreign exchange market is based exclusively on speculation: Investors bet their money on the fact that a currency will rise in price.

Currencies are traded in pairs on the Forex. A common example would be the EUR / USD pair, trading for example at 1.2953. Here the euro is the base currency and the US dollar is the exchange rate currency. For all currency pairs, the base currency is worth one unit, while the quote currency indicates how much of this currency one unit of the base currency can acquire. In this example, one euro can buy $ 1.2953.

Investors can now earn money by betting on either an increase in the price of the currency or a decrease in the price of the base currency.

Another way to look at forex trading is to see the base currency as a short position. To buy the quote currency, the base currency must be "sold". The quote currency is therefore a long position.

In the example above, we see that one euro can buy $ 1.2953 - and vice versa. In order to acquire the dollars, the investor must first go short in order to be able to go long afterwards.

In order to be able to make money now, the investor must sell the dollar back as soon as the value has risen compared to the dollar.

As an example: If the price of the currency pair rises to 1.3953, the investor would have made a profit of € 100 on an investment of € 100,000.

How to Find the Right Trading Platform A trading platform is software used by an investor to open, close and manage trading positions through a broker. Online trading platforms are often offered free of charge by brokers if a… ›read more

© Verlag für die Deutsche Wirtschaft AG, all rights reserved