This is really called the Forex Market. It’s like the Share Market or the Stock Market we hear from your country. This is called Forex, as well as FX Market and Currency Market. When we say the market, we suddenly remember the “fair”, right? You guys say how people earn money on the market and say, “Sell goods.” So how can I make money on Forex Market? What would you say? No, I’ll tell you the answer. Forex Market earns money “selling money”. Maybe now you look at what kind of aberration. Do not worry, I’ll explain.
Forex is derived by adding a combination of Foreign and Exchange. Now, perhaps you have a little idea. Until then, continue reading. We were the first to say how people earned money on the market. If they want to make profits, they have to buy goods at a lower price and sell them at higher prices. And roughly their profit goes,
Profit = Buy price – Sell price
Buy price = 90 and price = 110
Profit = 110 – 90
Profit = 20
Now let’s see how this concept applies to Forex. Have you ever been to a foreign country? Or have your relative or friend gone abroad? It is one of the tasks that someone has to do to change our money for the money in the relevant country. For example, if someone goes to USA, they must be converted to Sri Lankan rupees ($ US dollars). (Otherwise, it’s over.) Many people do this through a bank or through a currency exchange.
It’s just that you changed your money so that you made a Forex trade unknowingly. But we do it not for a profit, that’s why we’re not getting that much metric. Let us consider an example. We’re planning go on USA. We need US $ 1000 for that. We ask the bank how many rupees to get US $ 1,000 so that the bank will be able to view the exchange rate and we will need US $ 1000 to buy it.
You already know that Exchange rates will change day by day (in fact, this day, the Exchange rates will change in seconds, you will quickly understand this). Now, let’s say that today’s US $ to Sri Lankan Rupees Exchange rate is 110.53, So, how many rupees to get US $ 1000?
US $ to Sri Lanka Rupees Exchange rate: 110.53
Required US $ = US $ 1000
The amount needed to purchase US $ 1000 is Rs. 110.53 X 1000
= 110,530 / =
Now we have taken Rs 110,530 to get us US $ 1000. Now, we’ll come back to Sri Lanka about six months later. Somehow, we’ve earned about US $ 1,000 in the same month that we got six months ago (do not ask how to). When we come to Sri Lanka we go to the bank and ask how much the US dollar is for the Sri Lankan rupee exchange rate, and the bank says today is rate 112.72. Now, let’s see how many rupees will be found in our US $ 1000.
US $ to Sri Lanka Rupees Exchange rate: 112.72
US $ = US $ 1000
The amount we receive is 112.72 X 1000
= Rupee 112,720 / =
Let’s see if we have any advantage now? Or a waste? That.
We spent US $ 1000 on = Rs. 110.530
We received US $ 1000 = Rs. 112,720
We first learned that “profit = the price of the purchased price”, then let’s see if there is a loss and a profit.
Profit = 112,720 – 110,530
= Rs. 2,190
We see that we got a profit of Rs 2,190. But we made this deal more than just to get a profit (that is, get USA to get the money and get a rupee when returning to Sri Lanka). But there are those who make profits. It means that when one currency is paid, the rate increases, and the people who buy it become more profitable. That’s what’s on Forex Market. Now you understand how to make money and earn money. The story is not over here, it’s really the story from here.
You might have thought that this could not be money for money. Because we invested 110,530 rupees, but only wanted 2,190 rupees. But the Spot Forex we’re learning is much different (not too much, a little bit). This is because it has a beautiful word that has Leverage, and many are coming to the Forex. There are not only leverage, but a lot of other words are Pips, Lots, Mini-lots, Micro-lots, Margins. Let’s get this from the next lesson.