The 6 Trillion Dollars A Day Market Forex Trading

then we’ll take a look at the many factors that influence it they’re placed into two categories   fundamental analysis and technical analysis which are basically the two faces of the same coin so   stick around to learn more what is forex the forex market stands for foreign exchange and it’s just   like a stock market the only thing that changes is that you don’t trade stocks you trade currencies   the us dollar the euro the british pound the indian rupee and so on each country has its   currency and citizens trade them to buy goods 200 years ago it wasn’t such a globalized world   trades were done locally and possessing goods from another country was considered an extreme luxury   nowadays it’s completely the opposite just look at what you have in your house   most of the things that you own are produced in another country and that’s the norm   but what currencies have to do with this let’s say you want to buy the ultimate   forex mentorship program online from a fancy guru your currency will be exchanged into his   by your bank when you’ll buy his course in a little way you’ve participated in the forex market   without even knowing it why because you basically just bought his currency the demand for it has   risen and so is its price of course your action is just a microscopic drop in the ocean but add   all the trades done worldwide every day you’ll obtain a tsunami let’s go over another example   imagine you’re going on a holiday you move from the us to france once there french people will   unlikely accept your u.s dollars if you want to do all the funny stuff france has to offer you’ll   have to exchange your dollars into euros let’s say you want to exchange two thousand dollars the   exchange rate is around 0.85 it means that one dollar is equal to 0.85 euros the euro is more   valuable than the dollar so for your 2 000 you’ll have 1850 euros days pass and you have a lot of   fun there you visit the louvre the eiffel tower and you spend more money in wine than you expected   once the holiday is over you still have 100 euros left if you change them at 0.85 you’d have 85   but you decide to keep them as a memory two months later you’re in your house in the u.s   you’re chilling on your couch and you see the news you discover that the exchange rate has changed   it’s not 0.85 anymore it’s 0.95 the dollar has gained value over the euro it means that if you   change your 100 euros into dollars you won’t have 85 dollars you’ll now have 95 so you’ve  

basically gained 10 dollars by simply holding your euros and waiting for the price to change   if you’ve kept a thousand euros you would now have a profit of a hundred dollars pretty awesome right   you’re just too sad to have spent so much money in wine it happens the same for the us dollar   and the canadian dollar for the us dollar in the british pound or the euro in the british pound   as you can see the forex market is not about a single currency it always works in pairs   people don’t invest in the forex market going on holidays all the year long and exchanging   currencies it wouldn’t be practical instead they trade currencies through an online exchange office   run electronically within a network of banks how do you trade in the forex market   as we’ve said earlier with the forex market you don’t just invest in one currency you invest in   a currency relating to another this is known as a currency pair there are 180 currencies in the   world right now it makes more than 30 000 possible permutations of pairs but more than 50 percent of   the trades involved guess what the u.s dollar let’s take for example the currency pair u.s   dollars and euros it describes the price of the dollar against the euro right now the usd eur   is valued 0.85 it’s pretty simple with one dollar you buy 0.85 euros it also works the opposite the   eu usd is valued 1.20 with one euro you buy 1.20 what’s the difference if you invest a thousand   dollars in the usd eur you’re basically betting that the dollar will gain value over the euro   here’s the thing consider this currency pair just as a normal stock if you buy at x price   and you sell it when the price rises you’ve made a profit but what are the factors that influence   the variation of this price here it comes two useful fellas but so different from each other   fundamental versus technical analysis you might have guessed that knowing how the price will   change in the future can be very profitable of course no one has a crystal ball to predict the   future but there are signs that tell us how the price will change there are two different schools   fundamental analysis and technical analysis let’s meet joe joe is a precise and patient guy   he likes to observe the total picture to make his choices in the long term he’s a fundamental   analyst let’s meet jim now jim is a fast and dynamic guy he likes to focus on a single aspect   to make his choices in the short term he’s a technical analyst jim and joe are at the mall   but they’re not there to go shopping they’re there to make money they sit on a bench in front of them   they have five stores they both have to decide where to invest their money how do they do that   joe who’s a thoughtful and reasonable guy he wants to do all the proper research to make the right   bet he enters in one store to study the products the price for every single item and many other   factors he also meets the manager and he tries to guess if he’s a wise manager or a total schmuck   what he’s doing is a fundamental analysis he hardly believes that the price of an investment  

truly matches the real value of it why is he so suspicious joe is a fundamental analyst   just think of him as the annoying customer at the restaurant that asks the waiter if the shrimps are   fresh or frozen spoiler they’re always frozen he strongly believes the economic sources drive   the total value of the company he wants to be sure that the conditions of the company’s   wealth reflects the price of that company he does the same long operation for all the five stores   so it’s quite a long process wait what’s jim been up doing the whole time he stayed on the bench   he’s chilling with a milkshake in one hand and his pc on his lap don’t get me wrong he gauged the   opportunity to invest in one of the five stores but in a different way he’s a technical analyst   the only thing he cares about is the variation of the price over time jim believes the price is   the only important factor to consider in order to invest or not at a company he also knows the price   changes throughout time if there are different patterns and trends that repeat over time it’s   very likely that they’ll do the same in the future jim looks at all the five different stores price   variations over time he tries to understand which one has the best chances to grow in the future   now let’s apply the same concept to the forex market joe thinks that europe’s economy will   grow faster than turkey it’s a strange example you’ll understand why in a minute   in the result he thinks the euro will strengthen against the turkish lira   joe knows that things like geopolitical events economic news and government decisions change   the price of a currency he also wonders how much money does the central bank produce he knows that   the more an item is available the less value it has with money this is called inflation turkey   has a strong inflation above 11 right now euro has an inflation at 1.5 percent joe decides to invest   in the currency pair eur try he bets the euro will continue to gain strength against the lira   but it’s not over yet many traders and economists say the most important factor that influences the   forex market are interest rates when you buy a currency you put money in the central bank   the bank says thanks for the deposit and it pays you back a percentage of your initial investment   this is an interest rate the interest rate of the euro right now is at zero percent the central bank   of europe is saying you know what my currency is pretty strong right now i don’t think i’ll pay   you any interest on the other side the lira has high interest rates turkey’s saying yes please   buy my currency turkey decides to raise the interest rates even more it raises from 11 to 15   this is very attractive for other investors they decide to buy the lyra not the euro the result   joe is now losing a load of money with his eur try but the political instability and the high  

inflation has made the lira depreciated over the last few years so who knows what will happen   in the future we hope the best for joe these are the basics of fundamental analysis as you can see   many factors influence the variation of price and many of them are difficult to predict as we   know jim prefers graphics the eur slash try price changes a lot over time even within a single day   this is known as high volatility and it’s a great opportunity for short-term traders like jimmy   if he buys a currency at 2pm and then sells it at 3pm when the price is slightly risen jim   makes a little money but multiplied for all the transactions he does and you’ll have a nice return   on investment the question is how do you read graphics once again there are many ways to do that   the basic approach is by support and resistance the fx price is volatile it means it changes a   lot in a short amount of time if we connect all the times it goes up we have a line on the graph   known as resistance we can do the same when the price goes down in this case it’s called support   technical analysts know that trends tend to repeat themselves over time if they notice the   price breaks through the line of resistance it’s a sign that probably it’ll do the same in the future   this is a great time to buy on the opposite if they notice the price breaks through the line   of support this is a sign that the price could decrease over time this is the right time to sell   so who’s having the best approach well it depends   it’s important to consider that most of the time the best solution is a combination of the two   you have to know when to use them just like when you’re at the restaurant you have first courses   and second courses if the first course is a soup you won’t use a fork and knife to eat it   with the same logic you can’t eat a steak with a spoon fundamental analysis should be used as an   indicator to show you what to trade and in which direction to trade once you have this you can use   technical indicators to understand what’s the best time to enter and exit to make the best profits   we hope this video gave you a good perspective of what the forex market is and how it works remember   no investment is risk-free and with the forex exchange market there a lot of risks involved   use it as something to diversify your portfolio and not to retire at 25 and fly to puerto rico   in any case think about it the next time you buy something online it’s just another little drop in   the ocean but it’s what moves our world economy today if you’re interested in forex i’ll leave   a link to a good course in the description below so thank you guys so much for watching i hope you   enjoyed the video if you’re new to the channel welcome and make sure you subscribe so you never   miss any of our videos with that said have a great day and i’ll see you all in the next one

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