explain this FOREX to me in street words please !!?
This paragraph from a website and i want to understand it in street words , please tell me what is saying here in simple words :
“Because you’re not buying anything physical, this kind of trading can be confusing. Think of buying a currency as buying a share in a particular country. When you buy, say, Japanese Yen, you are in effect buying a share in the Japanese economy, as the price of the currency is a direct reflection of what the market thinks about the current and future health of the Japanese economy.
In general, the exchange rate of a currency versus other currencies is a reflection of the condition of that country’s economy, compared to the other countries’ economies. ”
Tagged with: currencies • Currency • exchange rate • future health • japanese economy • japanese yen • paragraph • reflection
Filed under: Forex Street
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Find a better website. They couldn’t explain a circle without confusing someone.
When trading in Forex, you are buying and selling currencies, one against another. You buy yen using dollars. Later on, you have to sell yen and get dollars back to finish the trade. You can do this with any currency pair, and you can buy either one first.
Buy yen with euros.
Buy sterling with chinese yuan.
Whatever.
You just have to do the other half later on to close the trade.
Is that more clear?
What you buy at Forex is a futures contract. You can also make a short sale of a futures contract.
You sell Japanese Yen to be delivered in December if you think you can buy back your sale in December at a lower price.
You buy December Yen if you expect the value of yen to rise against the dollar in December.
It is all buyers and sellers speculating on future prices rather than actually wanting to buy it or having it to sell. If you sell you must buy it back at the going rate in the future. You don’t actually have all those yen; you just sell it short if your opening transaction is a sale.
If you buy before you sell, then you must sell it to close the transaction.
An airline may buy jet fuel futures contracts so they won’t get hit with an unexpected price increase as they need fuel in the future. They don’t actually buy it on Forex for delivery, but if the price doubles, they will double their money on Forex, so they don’t suffer from the price increase.