How to fry foreign exchange to make money?


"Foreign exchange" refers to a shorthand method of foreign currency exchange. It's a market for currencies in different countries. [1] Investors trade in foreign exchange for the same reasons as they do in any other market: because they believe that the value of certain currencies will rise or fall over time. Remember, money, like any other commodity, is a commodity. One day, they will appreciate. On other days, they depreciate. You can use foreign exchange to make money from the fluctuation of foreign currency price.

Part I: basic principles

1. Understand the currency transactions on. It is a global currency exchange and currency backed financial instrument (contract to buy and sell currency in the future). Participants range from the largest banks and financial institutions to individual investors. Money is directly traded in other currencies on the market. As a result, currencies are priced in other currencies, such as the euro against the US dollar or the yen against the pound. By effectively seeking price differences and expected value increases and decreases, participants can obtain (and sometimes large) investment returns through trading currencies.

2. Understand currency price quotation. On, the price is quoted in other currencies. This is because there is no way to measure value, not another currency. However, the US dollar is used as the base currency for determining the value of other currencies.

For example, the price of euro (Euro) is quoted as (quotation number) USD / euro.

Currency quotation marks are listed in four decimal places.

Once you know what to do, currency quotes are easy to understand. For example, the JPY / USD will be quoted as y0.0087/usd. You should understand it as "you need to spend $0.0087 for a yen."

3. Understand arbitrage. Simply put, arbitrage is the use of price differences between markets. Traders can buy financial instruments in one market and hope to sell them at more prices in another. In, arbitrage is used to profit from differences in currency quotations. However, these differences do not only occur between the two currencies, so traders must use "triangular arbitrage", that is, "triangular arbitrage" involving three different transactions, in order to profit from price differences.

For example, suppose you notice the following quotes: 20.00usd/mxn, 0.2000mxn/brl, and 0.1500brl/usd (between us dollar, Mexican peso and Brazilian real). You don't know if there are arbitrage opportunities here, so your theoretical value is $10000. With your $10000, you can buy 200000 pesos (10000 * 20.00usd / mxn). Then, with your 200000 pesos, you can buy 80000 reais (200000 * 0.2000mxn / BRL). Finally, with your 80000 rials, you can buy 12000 dollars (80000 * 0.1500brl / USD). Through these transactions, you make a profit of $2000 (US $12000 - $10000).

In reality, arbitrage offers little, if any, profit and price differentials are almost immediately corrected. Lightning trading systems and massive investments have been used to overcome these barriers.

Foreign exchange transactions are conducted in a large number of ways. A standard hand is 100000 units of a currency, a 0.1 hand is 10000 units, and a miniature hand is 1000 units.

4. Understand leveraged trading. Traders, even very good ones, tend to have only a few points of arbitrage margin or trading yield left. To deal with these low returns, traders have to trade with a lot of money. In order to increase the funds available to them, traders often use leverage, which is actually trading with borrowed money. Trading on can use very large leverage compared to other types of securities, while a typical trading system allows a margin requirement of 100:1.

A 100:1 requirement means you only need to deposit 1 / 100 of your investment currency. A deposit, called a margin, protects you from future losses in foreign exchange transactions

Leveraged transactions magnify potential gains and losses, so be careful when doing such transactions.

Part two: finding the right foreign exchange broker

1. Ensure that brokers comply with current regulations. The broker shall be a member of the National Futures Association and registered with the commodity futures trading commission as a merchant and retail merchant of the Futures Commission. Usually, you can determine if the broker is complying by visiting the "about us" section of its website. This is what the company will disclose if it is a member of the NFA and is registered with the CFTC.

The State Administration of foreign exchange has formulated rules to maintain the integrity of the currency exchange market. The CFTC's mission is to "protect market users and the public from fraud, manipulation and abuse related to the sale of commodity and financial futures and options, and to promote an open, competitive and financially sound futures and options market".

2. Make sure you provide the currency pair you want to trade. This may be because you want to trade in a specific currency (e.g. US dollar to Swiss Franc). Make sure that the brokerage you're considering offers both currencies.

3. Check the comments. If you think you've found a great brokerage, search the agency's reviews online to see if others have good experience. If you find that the vast majority of commentators are complaining about brokerage firms, go ahead.

4. Look at the trading platform. Make sure the trading platform is designed in such a way that you find it easy to use. Usually, brokerage websites provide screenshots of trading platforms online. You may also find videos showing trading platforms that people are actually using. Make sure this is the platform you can use.

5. Pay attention to the Commission. You have to pay every time you make a deal. Make sure the commission you pay is competitive.

Part three: success of foreign exchange transaction

1. Use a simulated account. Like everything else in life, you'll get better at forex trading. Fortunately, almost all major trading platforms offer a so-called mock account that you can use to trade money without having to spend any hard-earned money. Use this account so you don't spend cash on your studies.

When you make mistakes in practicing Trading (and you make them), it's important that you learn from them so that you can avoid future mistakes. If you don't benefit from experience, practicing trading doesn't do you any good.

2. Start small. It's a good idea to start small when you've completed your hands-on deal and make sure you're ready to face the real world. If you take a big risk in your first trade, you may find that fear of loss will begin and your emotions will be controlled. You may forget what you learned in practice and react impulsively. That's why it's best to invest a small amount of money first and then increase the size of your position over time.

3. Keep a diary. Record your success and failure in a journal that you can comment on later. In this way, you will remember the lessons of the past.

4. Find and take advantage of arbitrage opportunities. Arbitrage opportunities appear and disappear many times a day, so it's up to you as a trader to find them and take action. It's almost impossible to look for these opportunities manually; when you figure out whether there are arbitrage opportunities, the time is over. Fortunately, many online trading platforms and other websites offer arbitrage calculators that can help you quickly find opportunities to make the most of them. Search online to find these tools.

Become an economist. If you want to be successful, you need to have an understanding of basic economics. This is because a country's macroeconomic conditions will affect the value of the country's currency. Special attention should be paid to economic indicators such as unemployment rate, inflation rate, GDP and money supply. More importantly: pay attention to the trend of these indicators so that you can know where they are going.

For example, if a country is about to enter a period of inflation, it means that the value of its currency is about to decline.

You don't want to buy that currency.

Focus on countries whose economies are sector driven. For example, Canada / dollar tends to fluctuate in tandem with crude oil. If crude oil prices rebound, the Canadian dollar may also appreciate. So if you think oil will appreciate in the short term, it might be a good idea to buy Canadian dollars.

Follow a country's trade surplus or deficit.

If a country has a healthy trade surplus, it means that buyers of its products must first convert their currency into the country's currency. This will stimulate people's demand for money and make it appreciate. If you think a country's trade prospects will improve, buying the country's currency may be a good idea.

6. Remember the mantra "all other things are equal.". Some sound foreign exchange trading principles were mentioned in the previous step. However, the economic conditions described here do not exist in the bubble. Before you buy a country's currency, you have to look at the whole economy.

For example, a country may have a healthy trade surplus, which may lead to the appreciation of its currency. At the same time, the country could be an industry driven country with a currency linked to oil. If oil falls while its trade prospects improve, its currency may not appreciate.

7. Learn to read charts like professionals. Technical analysis is another way to make money from foreign exchange. If you examine the historical chart for a specific currency, you may notice some patterns in the chart. Some of these models can provide a forecast of the direction of money.

The "head and shoulder" model suggests that money is about to break through its price range.

This is a number of technical indicators used.

The triangle pattern shows that the high - low range of a currency is tightening

It is also a signal that money may explode, depending on the overall direction of the triangle.

You can see a swallowing pattern on the K-line. At that time, the range of one K line completely swallowed up the scope of the previous K line. In this case, the money may move in the direction of swallowing the candle. This is an excellent trade signal for many uses.

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