As an investor, the fundamental thing we trade is our money. Money is what starts everything off for us.
We invest in education and our trading, so that firstly is the fundamental thing we trade.
In all honesty you never trade for anything physical. This can be something which many don’t understand however, it's quite simple.
Understanding Forex Trading
A good way to teach you about what is traded in Forex is using stocks as an example.
Stocks are something most understand. Imagine buying stocks or shares in a company. You have invested in a company and things can either go one of two ways. Up or down.
The stock you have was bought at a price and this is your base, if the stock rises in value, what happens?
Your profit is the difference between the price you bought and the price you sold. This same formula applies for losing money.
Trading Forex Currencies
We buy currencies or sell currencies and look to see increases or decreases in price. Like mentioned above, if price moves in the correct direction, we make money.
When you buy Euros you are basically buying a share in the European economy. You are investing in the fact you believe the economy will become stronger. If you are right and the currency improves you can then sell back what you have bought for a profit.
Forex involves trading currency against currency. There are several pairs and for example, the most traded currency pair is the Euro Vs. the dollar.
This would be seen as the EUR/USD, this is how you will see it in your account (Watch this video for more currency nicknames).
As mentioned about the Euro dollar it is the biggest pair to trade. The most common pairs are known as majors, and then you have the next tier which are minor pairs. Apart from these two groups, you also have a group called exotics.