Currency brokers and other traders who use the FOREX system ignore some of the basic fundamentals of the currency trade. They are able to gain huge profits from people who don't have the skills necessary to hold on to their funds. There are two basic concepts that every trader should have in order to truly make money trading currencies.
The primary distinction is that it's about buying low and selling high. And that's exactly what you're doing when you are using FOREX exchange rates. There is no relationship between the FOREX market and a country's currency value.
As you can see, the major currencies on the FOREX exchange are worth nothing more than a fraction of a cent. When you're using the FOREX currency pairs, it's really all about your interpretation of the situation and how much you'll be willing to spend in order to make that one sale.
But as you can see, the major currencies are worth next to nothing, while the FOREX currency pair pairs are worth millions. This makes a big difference when it comes to being able to make a profit from the markets.
For example, let's say you buy currency A for one dollar and sell it for ten dollars in FOREX exchange. Obviously, you are going to make a fortune, right?
However, if you were to hold onto the currency A until the following morning, it would be worth a lot more. The question is, why did you hold onto it?
Well, you may have been able to hold onto currency A for up to two days. But why would you wait two days to sell it?
Why wouldn't you sell it right away and be able to get rid of it before the FOREX market changed? This is one of the best ways to actually manipulate the market and make yourself and your money lose lots of money.
It's easy to see why traders get ripped off when they are forced to hold on to currencies longer than they need to. You may be wondering, "Why wouldn't I just buy the currency and let it fluctuate freely?"
That's exactly what you should do when you're looking at FOREX exchange rates. You're looking to purchase low and sell high, not hold onto it for weeks at a time.