Across the world, thousands of traders are trading the Forex markets enabling world trade to take place. Companies, hedge funds, individuals and, of course, banks are trading the markets and profiting from movements in exchange rates.
The real world
Does it work? Trading supports the world economy to the extent that international trade would not be possible without trading. For as long as people have inhabited the earth, trading has existed. Put simply, trading is the exchange of one thing for another.
Currency trading is carried out at many different levels in the real economy. You will have “exchanged” one currency for another if you have visited another country. Governments and businesses need currencies around the world to support investment and to pay for goods and staff. This continuous demand for currencies around the globe is what drives the markets.
So I went long GBP/JPY. OK, at the moment I am up over 150 pips and never
have I done that before. Many thanks for letting me into your world.
H.K. – West Midlands – April 2013
Can everyone make a profit?
This is one of the questions I am frequently asked. It is a commonly held belief that if I make a profit, someone else must have suffered a loss. That may sometimes be the case, but is not always true.
If you buy something from a supermarket on special offer, does it follow that the supermarket is losing money on the item? Or that the supplier of that item lost money? Or that you are losing money? Of course not, each transaction at each stage of the process was carried out at an agreed price that each party was comfortable with at the time.
When buying and selling currencies (commodities, shares, etc.), there is a willing buyer and a willing seller dealing at a price that works for them at the time. If you are visiting the USA next month, you need to buy some US Dollars at the best price you can as you need them for your visit. Whether you (or someone else) is making a profit (or loss) on the deal does not play a part in your decision to buy US Dollars.
Collecting Pips
Your profitability trading the markets is measured in Pips (or points). It is a simple measure, as each pip has a value associated with it (determined by you). Once you learn how to recognise the market signals to buy and sell, you will be collecting pips too.
Trading is the ultimate business for scalability. For example, you could start trading by placing a value of $0.10 on each pip. As you gain in confidence, this could increase to $1, $10, $100 and much more. Banking a profit of just 50 pips a week at these levels can be a very useful addition to your income.