Although I often hear the word “FX”, I think surprisingly few people know the details. However, if you are interested in investing, many people are also interested in “FX”.
While I hear rumors that it is a risky investment, I also hear that it has made a significant profit. The difficult part of Free Forex Trading is that you can say “both are correct”.
Also, I hear the name “foreign exchange trading”, but is there any difference from FX? Also, does FX investment require a large amount of money? Is it easy for homemakers and office workers to get started? There are endless questions.
Here, I will explain how to start Free Forex Trading, including the mechanism to understand even beginners.
FX is an abbreviation, and the official name is “Foreign Exchange”. It means “Forex Margin Trading” in Indian.
To summarize, it is a transaction in which selling or buying foreign money causes a loss or, conversely, a profit.
For example, let’s say you bought $ 1,000 for 110,000 INR on a day when $ 1 was 110 INR. Of course, there is no loss and no profit immediately after purchase.
However, after that, if you sell 1,000 dollars you bought on the day when 1 dollar became 100 INR due to the strong INR, 1,000 dollars bought for 110,000 yen will become 100,000 INR, so a loss of 10,000 INR will occur. Will be.
On the contrary, if one dollar sells this on the day of 120 INR due to the depreciation of the INR, the 1,000 dollars bought for 110,000 INR will be 120,000 INR, so a profit of 10,000 INR will be generated. (Originally, the foreign exchange rate fluctuates in real-time, but it is omitted for the sake of simplicity)
In this way, FX is a mechanism in which the difference in foreign exchange rates becomes a profit by trading currencies between two countries. Depending on the dealer, FX handles currencies of many nations.
Moreover, because the machine makes the difference between currencies profitable, the larger the difference, the more beneficial it will be, so we are also targeting currencies other than developed countries.
FX is a transaction in which profit or loss is generated by buying and selling foreign currencies. This “sell” or “buy” can start from either and adapt to exchange rate fluctuations.
If you start with “buy”, you will make a profit by selling the foreign currency you bought at a low price at a high price, but if you start with a “sell” of a foreign currency, you will get back the foreign currency you sold at a low price at a high price. Must be.
To make a profit when you start from “selling”, the point is to sell high and buy cheaply. It is said that “buy” works well when the market price goes up, and “sell” works well when the market price goes down.
Free Forex Trading has a greater chance when the price movement is intense. Beginners may find it difficult because they need to make money while predicting the price movements of each currency.
If you are new to Forex or are not familiar with it, it is better to challenge the interest rate difference with foreign currencies rather than making a profit by aiming for a stronger INR or a weaker INR.
It is recommended to purchase foreign currency using the interest rate difference between India and other countries with low interest rates to minimize the risk.
For example, if you buy Australian dollars when the interest rate in India is 0.1% and the interest rate in Australia is 5.0%, the interest rate difference between the two countries will be 4.9%, so during the holding period of Australian dollars, it will continue to be 4.9%. You can get the interest rate.
This interest rate difference is called the “swap interest rate”, and you can receive swap points for the amount you hold and the holding period.
FX and interest rate difference
How to make a profit to take advantage of the interest rate differential of each country is a “currency swap”. As a mechanism of foreign exchange, the relationship between FX and interest rates is inseparable.
The reason may be that if you make a mistake in the judgment of a country where interest rates rise or fall, you will incur a significant loss, or conversely, you will eliminate the possibility of a substantial profit.
At present, interest rates in India are lower than those in other countries. It’s unclear how long this low interest rate will last, but you will get a swap interest rate if you sell the INR and buy a currency with a high-interest rate.
However, it can be reversed if it fluctuates, so the general theory that “this way will make a profit” does not hold.
Swap interest rates are set differently depending on the Forex company. If you use swaps to make a profit, it may be a good idea to compare the swap interest rates of each company.
Swap interest rates are low-risk methods, so it is recommended for beginners and those who do not want to take risks.
Also, since swap interest rates constantly change, they are settled daily and paid to your account. It is easy to understand and can be relieved, so many people use it. The swap interest rate is stored in the Forex company as a foreign currency, not the Indian INR.
Advantages and disadvantages of leverage
Many of you may have heard of the word leverage as the basis of Free Forex Trading. Leverage means that you can trade more with a small amount of capital.
It is easy to understand if it is the same reasoning as the law of leverage. It sounds like there are many advantages to hearing that you can do it with less capital, but there are also disadvantages.
Let’s take a closer look at both the advantages and disadvantages.
As mentioned above, the merit of leverage is that you can make significant transactions even with a small amount of capital. For example, you can leverage ten times your capital.
Therefore, when you can make a transaction, your profit will be significant. The disadvantage is the opposite, and if you can’t trade, the damage will be substantial.
It is well-known that when a beginner starts, it is better to start with low leverage, which has less profit and loss. At first, let’s apply low leverage from about two times or three times. It is best not to cause significant damage without experience.
There is also a system called loss cut. This is a system in case of significant damage. It’s a system to prevent you from running out of money and running out of money, so it’s a good idea to keep this in mind as well.
How to start Forex
You can do it like an actual transaction and experience an FX investment. The only difference is that you are not spending real money, so it is safe to repeat the simulation over time until you get the hang of making a profit.
The exchange rate display will not come out at first, and spreads, prices, etc., will not react immediately. However, if you fully experience it in the demo, you will respond immediately when you have a chance.
Regarding the leverage that is a feature of Free Forex Trading, let’s experience the damage at the stage of the virtual demo.
Leverage is so risky that it is safer not to use it in actual operation unless you can use it. The profits are enormous, but the losses are enormous.
Even though it’s a virtual demo, it’s designed to be as severe as it is when you use it. If you gain enough experience here and use it for mental training, you will reduce the anxiety factor of the actual production.
It is also recommended to accumulate simulations until you can handle FX. It is essential to prepare before starting a full-scale operation.