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Explain Forex To Me, Please

Safe Forex
Forex trading is essentially the buying and selling of currencies from around the world on a centralized foreign exchange system. The basic means of making money in this area is to capture the differentials in currency prices.

For example, if you purchased Japanese Yen you may be able to trade 104 Yen for every dollar. If the Yen then moves up in value against the dollar, you can buy back into the dollar at a better exchange rate.

Foreign currency trading is done in lots of $100,000. While this sounds daunting, the foreign currency exchange system allows high margin rates. Of course, margin increases your exposure to loss, so you really have to know what you are doing.

One recommended way to get around this is to trade a mini-Forex account and to use a Forex trading software package. This option allows you to trade in $10,000 lots, and with the high margin allowances in the Forex, you could make trades with as little as $100.

As you gain exposure to the Forex trading business, you will notice the frequent use of the word "pip." The Forex market trades currency prices in pips. A pip means "percentage in point." In the Forex world this pertains to the fourth decimal point, which is equal to 1/100th of 1%.

One cautionary note about small trade sizes however, is that you will need bigger pip differentials to make a decent profit.

Currencies fluctuate for a variety of reasons, and predicting these fluctuations can be accomplished with technical analysis, and observation of current events, politics, and the economy of the country whose currency you are interested in.

Many traders choose to focus their efforts on one foreign currency and look for buy and sell signals by trading the dips and swells of that currency.

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