What’s forex? This is a hard question. There are such a lot of sites and TV adverts that mention forex nowadays. You know that it is a way that you can make money, but what exactly does it involve?
The word foreign exchange is short for FOReign EXchange. You may see it shortened even further to FX or 4X. It involves exchanging different currencies in the hope of making a profit when the exchange rates change. A simple example may help to illustrate this. Say you were planning to go overseas. Let’s imagine you are an American and you are planning a visit to Europe. The currency of most nations in Europe is the euro, so you would want to exchange USD from your bank for EUR so you would have some money to spend while you are there. You may buy $500 worth of euros a couple of weeks before your trip. But then, something comes up at the last moment and you cannot go to Europe after all. So you change the money back into dollars and put it back in your bank. Now, in the 2 weeks that you had those euros, the value of the EUR against the dollar will have changed at least a bit. But if the value of the dollar truly slipped during that time, or the EUR rose by a lot, you might finish up getting back more than $500. So when we look at what is currency exchange as a way to make cash, that may be a straightforward illustration. They go on the internet and, thru a broker, become involved in hopeful trading where you can deal in sums 100 or even more times larger than the amount that you have in your broker account. It is a bit like taking options in shares.
Clearly, this is a dangerous business, but as you can deal in lots that are one hundred, two hundred or even 400 times your own balance, it has the potential to make you a lot of money.
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