Lesson 1 - Forex? How Does It Work?

Uploaded by alparifs on 22.03.2011

ira very welcomed this tutorial from l pari my name's john bigger some and
today we're going to be answering the question what it is
the Forex
we're going to do this by looking at a real-life case study bait tube
represents essentially what works traders are doing everytime made by or
sell an exchange rate or currency pair
in order to look at what it creates a traitor really is doing
it's useful to liquor scenario that might actually occurring in you're alive
so here's a here's an example
let's say that you live in the u_s_
now you to typically will use the u_s_ doll or as your currency of choice
however you were going to go and visit another country so you're going to take
a summer vacation
in switzerland
so you're going to be
become very interested in the swiss francs
that's a symbol for the swiss pilot
you're taking over with you about five hundred dollars were at the spending
money so this is five hundred dollars
in u_s_ dollars
and you're going to want to get there you're going to convert that into swiss
so what at what rate do you convert that over it doesn't just convert five
hundred per five hundred unless the exchange rate itself was one equal
the exchange rate right now for example on the dollar to the frank
one point
to zero
per dollar
now goes a little bit further than that actually because
inmate currency market we take things out at least four decimal places
and in some cases five decimal places
so we're going to stick with just four decimal places for now
so the exchange rate right now means that
yeah it's going to cost one point in zero four nine franks
per dollar
or another words one dollar buys one point two zero four nine for x
so we're going to convert barb dollars
into frank's at that exchange rate
that means essentially we're going to be paid
six hundred
and two
so we're going to go through our vacation with six hundred into frank's
in our wallet and to use for some spending money now what happens however
at the end of the month or the end of this vacation when we've decided that we
carbone don't all we want to convert over our pranks which we
alternately never wind up spending we were able to use credit cards the whole
trip or whatever and that have to sell our wallet we still have six hundred
into ranks
in your wallet anyone convert that over into dollars
well this exchange rate that we were dealing with
has probably changed
exchange rates change every day and over a period of a month for two months or
three months they may change quite a bit
well let's pretend that in this case
the exchange rate did in fact change
and actually dropped
to one point one own for nine
will please send action greatest change to one point
one old or nine
then our conversion back into dollars is going to be a little bit different
what's happened here well essentially what's what's occurred is that the
has gotten stronger
to the dollar compared to the doll
it takes fewer frank's right now to buy a dollar
or in other words takes more dollars to buy the same number pranks we used to be
able to buy the beginning of the summer the beginning of our vacation
so we were to convert this over
this time around inc bernard six hundred into pranks
into back into dollars
we're going to walk away
at the end of the summer with five hundred and forty seven dollars
what just happened here is centrally we held frank's we own frank's during our
well that's largely what a currency traders doing it they think with the
value of the prayer
is going to in creates relative to the dollar and we're going to talk about
niece brethren talk bout white
why an exchange trader or straighter might think that
we're going to be able to convert at the end of the summer in data more valuable
asset into oneness comparatively lesser people well we live in the united states
of this is in such a bad deal with actually made forty seven dollars in
profits that we can take home and then spent
well this is a sense of the what a poor x traders doing
just on a larger scale and more pretty quickly
typically more profitably
only run through our case study and i think we've got a basic handle on how a
porn exchange transaction works works it looks and works pretty much like a dozen
real-life except we're doing it all pruitt a
trading application online
activity with larger amounts of money and of course much faster
but there are a couple of things that you need to make sure that you
understand of the first of which is what is what is at baxter warn exchange
work borax it's all refers to
trading one currency relative to another and in the case study we looked at
dollar verses the frame
i did number two is
you need to understand what the cat is
so in inept foreign exchange we always talk about well are you opera dem hips
and how much as a pep were at
what our fractional pets of cetera
this is a pep
when eight in exchange rate changes
just by warren
one point over here in the fourth decimal place baps up yep that's how
much that came so at this one from
one point one all poor nine to one point one all five dole
it has improved by one hip so that's one of the things we have to keep in mind
if we can remember these these two things you've got basically eighty
percent of what you need to understand
to be able to put in a couple of trades a couple of different rates
and really see how all this moves
and later tutorials we're going to go into detail on
how to ports traders use charts
what about the mental analysis
what moves currency exchange rates for currency exchange rates are there
there's majors and
and uh... crosses how do they work and what are their differences
so we're going to go into a lot of detail as to how does the point exchange
work but if you can keep this example in mind it'll make a lot more sense as we
go through the other to court