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How does trading work?
How does trading work?

Are you a beginner and new to trading? Learn how trading works.

Christiana Nelson avatar
Written by Christiana Nelson
Updated over a week ago

Trading on foreign exchange or any other instrument is speculating on the rise or fall of the price of this instrument. This means you never really own the physical asset you merely trading on the price speculation.

The base currency is the basis for the BUY or the SELL trade. If we believe that the Euro will strengthen against the Dollar we can BUY the EUR/USD pair, or buy the base currency (Euro), and simultaneously sell the quote currency (USD).

If we believe the Euro will weaken against the USD, we can SELL the pair, or sell Euro and simultaneously buy USDs.

Buying the base currency is called going long (looking to profit from the pair’s rising).

Selling the base currency is called going short (looking to profit from the pair falling).

Profits are generated when your trade goes in the direction of the market.

Making profits is a function of a lot of different things, the amount of the investment, the direction of your trade compared to that of the market, and many other parameters that you must learn and follow.

Trading is not a guessing game. The decisions that you make must be supported by real data.

The market movements are real and affected by the economic climate in the world.

Important economic events will have an impact on the rise or fall of a currency or a stock or natural disasters/ war all affecting the global economy and the price of those instruments. You just need to recognize those movements to take advantage of them.

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