An Intern Learns – Introduction to Forex
Unfamiliar desk? Check. Introductions to new people? Check. New travel route? Check. Yes, that can only mean one thing – it’s new job time! My name’s Kevin and I’m new here at MahiFX, a company new themselves on the Forex horizon, charting new territory in the land of currency exchange.
You may be wondering how I came to be here; well I’m originally from the southern tip of South Africa. Having left there about a year ago I shimmied around Europe for a while, over the Atlantic pond to the USA and now have landed back here in the UK. I have a background in marketing, advertising and freelance writing and now find myself in the delightful company of some Brits and Kiwi’s at MahiFX! Crikey, lets put another shrimp on the Barbie!
As I mentioned MahiFX are a Foreign exchange company and in order to get things done around here the first thing I had to come to grips was, well Foreign exchange. No small feat let me assure you. I have found myself wishing that I had to learn about something with less numbers in it – oh well, we work with what we are given! The first couple days have found me floundering in the air like Alice falling down the rabbit hole - each sentence I read in desperate hope of it explaining one term would involve more words that I didn’t know. Pip, spreads, charting, bid price, buy price, short selling, CFD’s, liquidity – oh the endless list of words! I’ve even had to start my own glossary I can refer to!
Well in basic, basic terms, Forex is a relatively straight forward concept to come to terms with (I say relatively straight forward, even though I had to watch about five video tutorials!). Based on what I’ve since discovered, here’s an example to help us all understand what Forex is.
Foreign exchange in the market place works, on basic terms, in a similar way to the way one would swap cash currency before going on holiday. For example, say you were living in England and left for a short holiday in France with £200 spending money. At the time when you left England the exchange rate (GBP/EUR) is 1.2611. This means that it costs 1.2611 Euros to buy 1 Pound. This means after conversion you have €252 to spend in France. However you only use your credit card and upon arriving back in England you still have that €252 left. However while you were gone the exchange rate changed. It now is (GBP/EUR) 1.023. The Euro has strengthened against the Pound and it now costs fewer Euros to buy one Pound. So now if we convert the €252 back to Pounds by the new exchange rate we are left with £246. And tadah! You’ve made a £46 profit.
Wishing we were talking about something with less numbers yet? Well we’re just getting started! Foreign exchange can be a veritable Pandora’s box and unless you have a degree in economics, you are starting at the bottom rung with me. It’s ok though, we’re gonna walk this cakewalk together. Bring a packed lunch though, it’s gonna be a long ride! Foreign exchange can certainly look daunting but with a little research, a cheeky demo account here or there, we should come out on top. Each week I’ll be delving further into the current enigma that is Foreign exchange, and in turn we will unlock her secrets and hopefully be on the path to success. Ready, set, go!