What is trading forex?

Q: What is trading forex?

I'm looking at ways to bring in some extra cash. Can anyone explain simply what it is and how it works. 

A : Best Answer:  Trading forex is a way to profit from the values between currencies, which are constantly changing. 

Currencies are measured relative to each other. That's why you see quotes (or exchange rates) expressed in currency "pairs", such as the following:

* USD/JPY = U.S. Dollar value versus Japanese Yen value
* EUR/USD = Euro Dollar value versus U.S. Dollar value
* GBP/USD = Great Britain Pound value versus U.S. Dollar value

There are a number of fundamental (i.e., interest rates, inflation, etc.) and technical (i.e., chart patterns, etc.) forces that drive the forex market, and cause currency exchange rates to fluctuate throughout the day.

These movements are what forex traders attempt to profit from.

For example, if a trader feels that the USD will grow stronger than the JPY, then she'll buy the USD/JPY pair. If USD does get stronger, then the currency rate for the USD/JPY will be higher and the trader can sell for a profit.

Conversely, if a trader feels that the USD will get weaker than the JPY, then she'll sell the USD/JPY. If USD does get weaker than JPY, the currency rate for the pair will be lower. She can then buy USD back at a lower price than she originally sold it for, resulting in a profit.

Although this all sounds simple enough, forex trading is a lot harder than it seems. Being able to guess where the market is going is the tough part.

Just keep in mind that forex trading is definitely NOT a way to "get-rich-quick". As with any endeavor, it requires taking the necessary time and effort to learn. Even then, success is not guaranteed.

Forex trading follows the basic rule of investing: low risk = low returns, high risk = high returns

Forex trading definitely is high risk, but it compensates by providing high returns. It's the "high returns" that gives it the reputation of being "get rich quick". Unfortunately, most beginner forex traders overlook the "high risk" part...

...but now you know!

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