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is heavily advertised on the Internet. Some ads make it sound easy to make money by trading forex. However, like any activity that requires skill and judgement in order to be successful you had best prepare yourself before engaging in trading for real money.The words forex currency trading are a bit redundant as forex stands for forex exchange and of course currencies are foreign exchange. Still many forex traders use the term forex currency trading when speaking of their trading activities so I suppose that the term is quite acceptable.
When trading forex you are always trading a currency pair. For example, you might be buying the Euro and at the same time selling US dollars. You have a pair of currencies. Or you might be buying Yen and selling US Dollars.
Or it could be that you live in London and are taking a trip to Japan. At some point along the way you are probably going to want to sell some British Pounds and buy Japanese Yen so that you will have the needed local currency for your trip.
In this way many travelers are involved in the foreign exchange market without even realizing it. Many billions of currencies change hands daily by international travelers selling their local currency for the currency that they will require at their destination. And again, each transaction involves a pair of currencies.
Trillions of dollar are exchanged daily as part of normal international business. For example, an English exporter may be sending goods to Japan and wishes to be paid in British Pounds. The Japanese importer will be required to sell Yen and buy Pounds to pay for the goods.
Interest rate differentials between currencies have a role to play in the demand for a currency as well. In general, speculative money will move towards currencies that offer higher interest rates on deposits. That is when the currency is expected to retain its value. It's no fun to get the interest return but more than give the return up due to a weakening of the currency. This has been happening with the US Dollar over the past few years.
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