A 6 Month Feature
Basics and Related Matters:
FOREX simply means Foreign (Currency) Exchange. The best way to explain it is in a form of an example.
On the 01st January 2018, Jacob Biggs (not real name) left Johannesburg International Airport to the USA, Washington DC. Because a South African Rand is not used in the USA, Jacob had to change the rand into a US Dollar. He then exchanged (bought) US Dollars. For R1,000.00 Jacob was given $100 USD because on that day $1 equalled to R10.00. Jacob spent 3 weeks in Washington DC.
After 3 weeks Jacob came back home without having spent that (initial) $ 100.00 that he had received when he left 3 weeks ago. During the past 3 weeks, the US Dollar strengthened, or its value in comparison to the rand got increased. When Jacob exchanged the $100.00 after 3 weeks he got paid R1300.00 (R300.00 more) because on that day of exchange the value of $1 US Dollar was equal to R13.00 meaning that the US Dollar had strengthened while the rand had weakened during the past 3 weeks.
When one becomes a Forex Trader this is what one does. One speculates which currency is going to increase against the other, then buys the one that is likely to increase. If indeed the currency increases as one had speculated, then the Forex Trader wins and makes money. (On the other hand one can speculate which currency is going to decrease the other specific currency. Then the Trader sells the currency that is going to decrease in value. This, however, may confuse a new Trader as such in this first issue focus is placed on buying a currency that is going to increase).
If when Jacob came back after three weeks suppose the value of $1 US Dollar was equal to R8.00, that means that the rand became stronger against the US Dollar which (US Dollar) became weaker. In that event, Jacob would be paid R800.00 (that is R200.00 less). In this event, Jacob lost money.
The above picture is precisely what happens in real life trading scenario. It must be emphasized though from the onset that in real life scenario smart Forex Traders do not ‘speculate’ (blindly), or at all, because there are tools that are used to assist Forex Traders to trade professionally with skill, confidence, and conviction. It must be emphasized from the onset once more that Forex Trading is not similar to playing dice. When you throw dice you have no idea how it will fall. You have no tool to use to predict at all how will the dice will fall. You are relying on pure luck to win. Forex does not work like that.
Forex is a risky game. One can lose large amounts of money. This statement though needs to be qualified immediately before one gets a wrong picture. Forex is a risky game if a Forex Trader voluntarily fails to use the normal trading tools to minimize risk. These trading tools are always at the disposal of a Forex Trader at all times. .Forex is also a very lucrative game. One can make large amounts of money at the same time. The amount one makes depends on the amount that one has used to place the trades. It is possible to make R100,000.00 (one hundred thousand rands) per day depending on the amount that one has used to place one’s trades.
Driving a car on the road is a very risky game but we drive cars every day. When driving a car there are at least two cars that are not under one’s control. These ‘two cars’ do not exist when trading Forex because everything is under the Trader’s control. To this extent, it can be argued that driving a car is riskier than trading in Forex. Few Basic Important Rules in Forex trade in order to win is that a Trader must do the following;
Take time to study the game thoroughly. At best a new Trader must take at least a minimum of three months of hard learning before a Trader can place a real trade using ‘live’ money (or real money). A Trader must use the dummy money that an agency will give out to practice to master the game well. Make use of the tools of the trade at all times to determine what currency to trade, when to place your trade, why to place your trade and the like. This will prevent a Trader from ‘speculating”, and relying on luck. Develop your ( personal) trading strategy. This can only be done once a Trader has studied the game very well.
Stop greed. A Trader must make use of a ‘take profit facility’ in small, regular intervals. Minimize risk. A Trader must always make use of a ‘stop-loss facility’ in each and every trade that has been placed.
To place a trade in Forex one needs to register with an agency that performs this function. It is generally free of charge to register. The Forex Market is open 24 hours a day but closed during the weekends. It is the largest money market in the world valued in excess of $5,3 trillion US Dollars per day, about $220 billion US Dollars per hour…It is strongly recommended that a new Trader must have an experienced mentor who will take him through the ‘corners’ of the trade as some of the issues are dealt with through experience more than through written academic books. In the next features we will deal with many of important aspects of this game such as, but not limited to;
A very brief historical background and context; Fundamental Analysis
The mechanics of how to trade like a professional Decoding selected tools that allow Traders to win big, and many more.