Exchange Rates

What is Forex

Well, what is Forex?

Forex is a short term of Foreign Exchange.  Have you ever visited US or any other country in the World?  For example, if you go to US from India,  and if you go to Foreign Exchange counter and ask exchange for $1000, they might have collected Rs.60,000/- from calculating 1$ = Rs.60/-.  After one week, when you come back to India after your trip and are left with $100 in your pocket.  To exchange them in Indian currency, if you go to the counter and hand over $100, there is no surprise, if they pay you either Rs.5800/- or Rs.6200/-.

This happens because, Dollar exchange rate might have decreased or increased in those 7 days.  O.k., what happened here is, if they pay you Rs.5800/-, you lost Rs.200/- for $100 or if they pay you Rs.6200/-, you earned Rs.200/- for $100.  Here unknowingly, you have entered into Foreign Exchange (Forex) and lost or gained some thing.  That is Forex.  But here in trading, you will not directly deal with physical currency, you deal with digital currency.

Who will participate in Forex?

Central Banks, Institutional Traders, Importers & Exporters and Individual Traders like you and me.  Previously, Central Banks, Institutional Traders and  Importers & Exporters used to participate in trading.  Central Banks, Institutional Traders used to participate in trading to meet their Supply & Demand requirements and Importers & Exporters Hedge to protect their transactions against change of exchange rates.  Later, Internet is available to everyone and Individual traders entered to try their luck.  Some of them are made Trading is their Bread and Butter.

Strategy:

If you Buy some currency at a particular price and after some time Sell it at higher price, you made some nice Profit;

If you Buy some currency at a particular price and after some time Sell it at lower price, you made some Loss.

(Or)

If you Sell some currency at a particular price and after some time Buy it at higher price, you made some Loss;

If you Sell some currency at a particular price and after some time Buy it at lower price, you made some good Profit.

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