The 2nd part of my topic “Understanding of Forex” is being presenting below.
As I was mentioned in first part that this is a trading business in which you buy or sell the one currency in exchange of other. Remember in Forex you always trade the currencies in pairs for example EUR/USD, GBP/USD or USD/JPY. In other words when you buy a currency on the same time you are selling other. For instance when you trade a pair say GBP/USD you buy Great Briton Pound and sell US Dollar you are selling other. As in all trading business the rules is the same buy at low and sell at high.
There are mainly two basis of trading one called Fundamental Analysis and second is known as Technical Analysis. The fundamental analysis depends on the economic conditions of the relevant countries. Suppose, on the basis of the news and Economic Indicators (will be discussed later on) you convinced that the UK economy will perform good and as a result of that the exchange value of the UK Pound will be rise so you will buy the Pair GBP/USD which mean you bought GBP and sold US Dollar and when the exchange rate of the GBP rise you sell the same pair and take your profit.
The third part of the topic will be presented soon.