What Is Forex and How Can Forex Automated Trading Software or Robots Help You Make a Profit?

Forex stands for Foreign Exchange, or Foreign Exchange Market. In Forex, you trade currency from one country and exchange it against that of another one. Read on to discover the basics of how it works and how Forex robots are making trading easier (and even possible) for more and more people.

How does Forex work?

As a rule, currencies are exchanged in pairs, one currency against another. Here are some of the pairs that make up the bulk of the transactions: the Euro trading against the US dollar, the US dollar trading against the yen, the British pound against the US dollar, and the dollar against the Swiss franc. In addition, the US dollar is also traded against the Canadian dollar or the Swiss Franc, and sometimes the New Zealand dollar is also traded against the US dollar.

As a Forex trader, you would make a trade when you believe that one currency might increase in value in relation to another. For example, if you believe the Euro will rise against the US dollar, you might exchange your dollars against Euros and then hold them as long as that trend continues.

Once that trend slows down, you can exchange your Euros for dollars again, and you'll get quite a few more dollars for your money. That's how profits are made in Forex.

It's not as easy as it looks

If you think this sounds almost too easy, you are right. There is a catch. Trends can change almost instantly for a number of reasons, including political and social changes and natural catastrophes.

Experienced traders, however, can get very good at keeping up with the currency movements and can make their money grow.

Unlike stock trading, where some positions can be held for weeks, months, or even years, trading cycles in Forex are usually very short, often lasting for just minutes, or in some cases, even seconds. That's in order to play it safe.

And of course, in order to make that work, you need to be able to actually make the trade exactly when you want it to be made.

With trades lasting such short times and the gains being comparatively tiny in each trade cycle, fees charged by account administrators would eat up all the profits unless you traded huge sums of money. And that's why currency trading used to be limited to banks and major investment companies.

How robots are making trading easier

Thanks to the advent of online trading and particularly Forex robots, however, individuals can also get into the action, since robots eliminate account administrator fees, even smallish accounts can be profitable.

Of course robots do a lot more than eliminate fees. Can you imagine how much time and effort would be involved in keeping track of all those currency changes? It would be impossible or at least very difficult to do that well enough to be successful.

And here's why things get even more complicated: It's generally a good idea to make lots of small trades rather than just a few big trades, just to stay on the safe side. It's a way to reduce your risk. Yet obviously, it makes tracking even more challenging. Fortunately, with high quality Forex robots, this challenging task becomes quite manageable.

How robots know when to trade

How well you will do depends on the sophistication of the robot, of course. There are also other factors involved, for example whether you've subscribed to a signal service that tells the robot when to trade. And the quality of the signals you're getting is crucial as well.

How live trading signals can help increase profits

The best quality signals are those that are monitored by actual humans who double-check that they are accurate. So the process may not necessarily be automated all the way through, yet it is possible for traders to set their systems up to run largely automatically. And the better the system and the signals it gets, the more likely it is to make a profit, even when the system is set up to run on autopilot.

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