Forex Basics - Part 1 of .... I'll let you know when we get there...

Hi,

OK, today I've learned a little bit about Forex. Here are some really basic basics - so basic you should know them already, but in case you don't...

FOREX is short for FOReign EXchange - if you trade FOREX you are trading in foreign currencies. It's also known as FX, or "Spot". Sometimes "FX Spot" - it's all the same thing.

You trade in "pairs", such as USD/EUR (US Dollar to Euro), or GBP/JPY (Great British Pounds aka Sterling) and Japanese Yen.

All the currencies are indicated by a three-letter code, where the first two are the country (eg US, JP, GB), and the third one is the initial of the currency (eg Dollar, Yen, Pound). The main exception to this is the Euro, which is EUR - if it followed the same convention, I think it should be EUE - but it's not. Europe isn't a country - perhaps that's why it gets special treatment.

Apart from those already mentioned, there are four more popularly traded currencies - CHF (Swiss Franc), CAD (Canadian Dollar), AUD (Australian Dollar) and NZD (New Zealand dollar). However, the USD, EUR, GBP and JPY currencies account for about 80% of all Forex transactions.

You make money by "buying" one currency, in the hope it will go up against the second currency in the pair, and IF it does, you sell it and get more of the first currency back.

It's a bit like changing your holiday money into a foreight currency, and then when you get home, changing it back. If the rate has changed in your favour, you get more back than you started with. Assuming you didn't spend any money in your vacation, of course. But you get the idea.

More of this in another post, but in short, you might buy EUR/USD - so you "buy" Euros at say 1 to 1.20, they then increase in value against the Dollar to 1 to 1.22, so you close your position (ie sell the Euros), and get back more Dollars than you started with.

Of course, if the rate had changed to 1 to 1.18, you would have lost money - that's the catch!

Thanks for reading - a bit more explanation on pairs and how you trade them coming up in "Forex Basics - Part 2 of.... ?".

Take care,
Zander.

Welcome to the Forex Insights Blog

Hi,

My name's Zander, and I know NOTHING about Forex!

OK that's the admission out of the way! So why would you want to read my blog? Well, what I'm planning to do is change the opening sentence to "My name's Zander and I know a whole LOAD about Forex".

If you want to come along for the ride, then get on board!

How it's going to work is this. I'm going to start off by doing some research, and finding out about some Forex basics. As I go along, I'll post about what I've found, and I'll try to make it as easily understandable as I can. For example, if there's a concept that I, as a complete beginner, find difficult to grasp, I'll try to explain it in a way that I think I could understand. Hopefully you will too...

Once I've got hold of the basics, I'm going to set up a couple of demo trading accounts - these are accounts with genuine online trading companies, the only difference being, you aren't using real money. I'll post how I get on here, and let you know my experiences with different trading platforms.

Make no mistake, I'm under no illusions that this is going to be some sort of Get Rich Quick Scheme - what I've learned so far tells me that there's a great deal of work required to become proficient in Forex Trading. However, I've also learned that with the right discipline, you can earn a regular income from Forex

OK, that's the disclaimer out of the way. And the first post too! Let's get this show on the road!

Best Wishes,
Zander.