The term Forex is derived from two words “Foreign and Exchange”. It is used to refer to the market where currencies from around the globe are being traded. What is fascinating about the Forex market is the fact that when you buy a currency you are also selling another currency at the same time.
If you go long in a position, it means you are buying a currency and hoping its price will go up. So you can sell it with a profit. When you sell a currency like a euro it’s also called going short and it means you are hoping for its price to fall with the goal of buying it back at a lower price.
So for example when you buy one lot of the euro-dollar pair, in effect, you are buying the Euro and selling the dollar. Conversely when you sell one lot of euro dollar. You are selling the Euro and buying the dollar.
Another example, let’s say that after reading the financial news, you feel that there is a high likelihood of the US dollar appreciating against the Japanese yen. So you decide to take a long position in the US dollar Japanese yen hoping that your trade will come off.
If your trade does go well and the US dollar does indeed rise against the Japanese yen. You will then be able to reap a profit from your investment in the US dollar. On the other hand, if your trade goes against you, so the Japanese yen appreciates against the US dollar, you will lose this particular trade.
Currency exchange rates are constantly fluctuating due to various economic or geopolitical factors. That is playing out all around the world every day. For a Forex trader, this constant rising and falling in the exchange rate are good as it represents Profitable trading opportunities. If you are able to determine the direction of these fluctuations then you will get the chance to profit from the constant price movements.
In the trading platform, you have a whole host of risk management tools that allow you to fix profits and limit risks. So even in a scenario where your trade proves incorrect, this will not damage your capital seriously. Here at CM, we have made it even easier for you to participate in this lucrative market.
Wherever you are, whenever you want, you can access Forex through the various trading platforms that we have made available to all our clients and if you are new to trading, we also have various educational resources at your disposal.