Why is Online Forex Trading Profitable?

The online Forex market has existed since the early 70's. Only in the past few years though, it has become accessible to millions of people through the development of the internet. Because the Forex market is available 24 hours a day, it's the only market that allows you to trade at your convenient time.

Today, because the economy is much more dynamic than it used to be, and the world has become a global village, economic conditions in various countries are also constantly changing, according to such factors as production rate, inflation and unemployment.

As a result, the rate of a specific currency changes and moves up and down in comparison to other currencies. This is the main reason of the process of rate fluctuations in the online Forex market.

In order to evaluate and predict these Forex market changes a trader can use fundamental analysis or technical analysis as a tool for investment. Whereas fundamental analysis is a more broad exploration into the economic factors influencing the online Forex, technical analysis uses charts and other indicators to asses price patterns that re-occur over time and can help predict the forex market.

Foreign Currency exchange rate

Currency exchange rate is the ratio of one currency valued against another. For example, "EUR/USD exchange rate is 1.2505" means that one euro is traded for 1.2505 dollars. If you've already invested in other markets before, you'll find the Forex trading system quite similar, and the transaction to online Forex trading smooth. An example of a Forex trade: During October 2006 you buy 10,000 BRP when the BRP/USD rate was 0.56. A month later, the exchange rate grew to 0.58. This means a profit of $350 in less than a month time.

Online Forex Trading Profits

Another example of an online Forex trade: If you buy EUR/USD, this means you are buying Euro's, and simultaneously are selling dollars. Your expectation therefore is that the euro will appreciate (go up) relative to the US dollar.

If you believe that the US economy will weaken and this will hurt the US dollar, you would execute a buy EUR/USD order. By doing so you will buy euros in the expectation that the currency will appreciate against the US dollar. If you believe that the US economy is strong and the euro will weaken against the US dollar you would execute a sell EUR/USD order. By doing so you have sold euro in the expectation that they will depreciate against the US dollar. More information concerning online Forex trading is available at Sigma Forex