If printing a ton of money causes hyperinflation and devalues money and amount of money is pretty static for all countries, how can you make money trading and investing in money? Forex trading has the great opportunity to trade 24 hours a day and five days a week (opens late Sunday but remains open until closing early Friday balancing out to approximately five days). And there's also a bit more to the world money flow than the ‘all countries have a set amount of currency’ idea. So, how exactly is money made by investing in money?
First, it's important to know what you're looking at when trading. You look at two currencies such as the EUR/USD. This is a conversion between the Euro and the USD dollar. The Euro is called your base currency and the US Dollar is your quote, or counter currency. So, when you see that the EUR/USD is 1.21345, that means that if you took one Euro to the U.S. and got its full value, you could purchase an item that cost $1.21. When you're looking at values this small, those other numbers after the two decimal places don’t really matter. However, when you’re trading and the quote changes from 1.21345 to 1.21517 and you have one hundred thousand tied up in that trade, you just made or lost $1,720 even though that one euro you were using is still worth that $1.21 candy bar. This type of information is reviewed by Apiary Fund in more detail as well.
The first thing to remember is countries owe other countries money. Now, if Australia owes Japan half a billion dollars for tech, Australia doesn’t have over 500,000 AUD to which Japan destroys and creates Yen for the current rate. Instead, it's more of a running log of cancelling and building debts between all countries. This is the ‘trade balance’ announcement that most countries put out. This news announcement states how much money the announcing country owes and is owed by each country. If Russia owed a net total of 2.5 billion to other countries, then the rouble may not be worth as much compared to other countries since it's owed, and thus, the rate changes. While this is a rough example, it gets the point across.
Other news events, other than trade balance, have a big bearing on the price too. Inflation reports, for example, are announcements about how the worth of a currency has changed. If the inflation was 2%, you’re now paying more for the same item. GDP announcements state the production of the country which can provide details about the economic state of a country along with hinting at what changes may occur to the trade balance, along with a ton of other information. All the news announcements you see Apiary Fund review in classes and what you see on economic calendars have an effect on the markets and the worth of a currency.
Since FOREX is leveraged, you can trade a sizable sum of money without having to be rich. So, the small changes that occur in the worth of a currency from news, or other sources, that you don’t notice in your daily life will make a large difference in your trading. If you look back and review the Apiary Fund article about why to trade FOREX, some of the points mirror themselves due to the fact that the primary reason to trade FOREX is to make profit. Yet, knowing how the money is made makes the process as a whole less taboo and more comforting for many people.