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2. What is Forex and Why?

We are passionate about forex, an abbreviation for Foreign Exchange. But you may ask now: what is this ‘thing’?

What many people don’t know, is they probably already participated in the forex market without even knowing it.

When you go on holiday to a country with another currency, you’re supposed to pay with the currency of that country once you’re in. In that case, you will need to change your home currency for the foreign currency.

For example, if we travel from Europe to the United States, we can change 100 euros to dollars at a money exchange office (a broker).

When arriving, you get $113 dollar for 100 euros (as the euro is stronger than the dollar). When we don’t spend this $113 during this holiday, and change it back to euros, the market rates have changed, and by changing our $113 to euros, we now get 105 euros back! Meaning we just made 5 euro profit because the market rates had changed in our favor. How hard was that?

In fact, we don’t have to travel to another country to exchange our money in order to make some profit. With the internet, we can easily exchange our money online through an app and online broker on our smartphone. That’s basically how forex works.

So when we buy or sell the one currency for another, we are trading in the forex market.


Trading vs. Investing

What we do, is trading on the foreign exchange. However, it’s not always clear to everyone what the difference is between trading and investing.

Actually, there’s quite a big difference between trading and investing.

When we are investing, we buy something against a low price, and expect the price to go up. As the price rises over time, we can make some nice profits.

However, if the market drops, we will lose the profits we gained. In case of a market crash, we can easily lose all the returns we made in several years in a short amount of time. People who are doing property or real estate, are usually investors.

In other words, with investing you can only make money when the price goes up.

When we are trading, we’re buying and selling as markets rates fluctuate by going up and down. With trading we can make money when the price goes up, but also when the price goes down. We can make money either way.

In other words, trading is recession proof.

Besides the fact trading is recession proof, there are multiple other benefits of trading:


Benefits of trading

  1. Everybody can learn it.
    It doesn’t matter how old you are. It doesn’t matter what education you have or from what background you’re coming. Inside our international network, we even have an 8-year old and 92-year old who are consistently making money.

  2. You only need a smartphone and internet
    You need very little things to begin. For trading, a smartphone and a stable internet connection is enough. It’s just as simple as that.

    Meanwhile, use your laptop, computer or tablet for study purposes, in order to become a next level forex trader.

  3. It can be done from anywhere in the world
    You can trade forex whenever and wherever you want. Even during work and on holiday. If you like, maybe even at the beach. Anytime of the day, you’re able to trade the forex market while you’re on the go.

  4. Small investment
    It’s a relative small investment to get started in the forex market. Most of us already have a smartphone and internet. Second, a laptop, computer or tablet would be easy.

    Third, you need some starting capital. You can start trading with as little as €50 euro as your initial deposit. We recommend to start with €100 in the market. Once you’re confident, you could top it up to €500 or €1000 so you’re able to trade with a larger account, and grow your money faster.

  5. No boss, staff or customers needed
    When you trade forex, you don’t need a boss, you don’t need any staff and you even don’t need any customers. How does that sound? Don’t take that wrong, as we love people, but in this case we mean that you create your own market. So, we are not dependent on others. The only one who’s needed is you.

  6. The more competition the better
    In forex we embrace competition. As we’re participators in a market with a daily turnover of more than 6,6 trillion dollar, there’s plenty enough money for everyone. In fact, the more people in the market, they bigger the market becomes.

  7. No products or stock holding
    Besides your devices, you don’t have to own any physical products or need a warehouse to store your products. Something that saves you a lot of time, effort, money and headaches.

  8. High profit margin
    As you need very little things to begin with, forex gives you a very high profit margin. Broker costs and commissions are minimal, so you get almost the whole slice of the pie.

  9. You are in control
    You decide if you want to trade or not. You decide were you enter the market, and were you exit the market. Nobody is pushing you to do things. You are the one who is pushing the buttons in the game.

  10. Let money working for you
    Rather than you physically working and changing your time for your money, you really let your money working for you so you can buy back your time. Basically you only have to click a few buttons on your smartphone and you see your money flowing and growing.

  11. The better you get, the more money you make
    The more you practice, the more experience you gain, the better you get… and the more money you make. It’s as simple as that.

  12. Very little taxes
    One of the most beautiful things of the forex market, is that the profits you make, apply to very little tax rates. For example, in The Netherlands the system works like this:

    a) If you earn up to €30.000,- with forex, you pay 0% taxes
    b) If you are a tax partner, you pay 0% taxes up to €60.000,-
    c) If you earn more than the number mentioned above, you pay:

0,21% taxes

Isn’t that crazy? The good to be true, right? Well, we can assure you: it is real.


So, now you know you should be in trading. But why exactly forex trading?

When we talk about investing, there are several markets we can invest in. For example:

  1. Property/real estate
  2. Stock market
  3. Forex market

As mentioned before, we like to choose trading over investing, as we can make money both ways. When doing property, we generally can’t trade that very easily. Therefore it’s called property investing, not property trading.

That brings us down to the stock market and the forex market.

Now, why should you be on the forex market, and not on the stock market?

Just have a look at this table first.

Stock MarketForex Market
$47.000.000.000$6.600.000.000.000
8000+ stocks7 major pairs
1:50 leverage1:500 leverage
VolatilityHigh volatility
Open during office hoursOpen 24/5

Now let us break it down for you:

  1. The forex market is way bigger than the stock market
    The stock market has a daily turnover of $47 billion (9 zeros) a day, while the forex market has a daily revenue of $6,6 trillion (12 zeros) a day. It’s like a goldfish compared to a whale.

    Now, just to clarify:

    1 million seconds = 12 days
    1 billion seconds = 32 years
    1 trillion seconds = 32.000 years

    Do you start seeing the difference between $47 billion and $6,6 trillion?

    Actually, let us write down another number.

$1.600.000.000.000

So, that $1,6 trillion. Any idea what this number resembles?

It actually resembles the number of outstanding U.S. student loans. Isn’t it crazy that we put ourself in debt to go studying? Then after graduation it can be hard to find a job, and once having a job, we’re working hard to pay off our debt again? Is that freedom?

With forex, we actually earn while we learn. Has learning ever been so wonderful?

Let us get back to point number 2 now, why you should favor the forex market over the stock market:

2) The forex market offers way more overview
On the stock market, you can pick from more than 8000 stocks. While on the forex market, you only have 7 major currency pairs (pairs with the US dollar in it).

It’s like going to an ice cream store where you have to pick over 8000 different flavors! Takes at a lot of time and you lose overview. The forex market is way more clear.

Besides, did you know that you can also trade stocks through the forex market? You can even trade indices like the Dow Jones (US Wall Street 30), Nasdaq (tech stock exchange) and S&P 500 (stock market index regarding the 500 largest companies of the US).

And if you like to, you can also trade commodities (i.e. oil and gas), metals (i.e. gold and silver), and crypto (i.e. Bitcoin and Ripple). So, don’t fear there’s not enough to trade on the forex market!

3) Big leverage on the forex market
Have you ever heard of leverage? Simple said, for every euro you put in, your broker will multiply that with a certain factor. In this way, you’ll be able to trade larger volumes and gain more. In forex, you can get easily a leverage of 1:500. Meaning that for every euro you put in, your broker wil leverage this to a trading position of €500.

In the stock market, you leverage is at most 1:50. So for every euro you put in, your broker will leverage that to a trading position of maximum €50. Quite a difference, right?

4) The forex market is way more volatile
Meaning that we have a lot of movement on the forex market and thus many opportunities to capitalize on. The forex market is very sensitive to the global economy and big news events. This will cause the market to move big and fast. And ultimately, if we anticipate in the right way, it can result in fast and big money.

5) The forex market is open 24/5
We, the so-called retail traders, can trade 24/5 on the forex market. That means that we have plenty of time to trade, and a lot of opportunities every day again. Don’t be afraid to miss out on a trade, because the next big opportunity is always nearby.

The Pacific, Asian, European and American session continuously overlap each other in the forex market, giving us 24/5 opportunities to trade.

Compared to the forex market, we can only trade a stock when the stock exchange on which it is listed, is open. So for example, when we have a stock of Tesla, we can only trade it during the opening hours of the Nasdaq.


So, how do I make money from forex?

Normally, when we talk to people about money, we use to say ”Hey man, how much money did you make?”.

In forex, we would like to say ”Hey man, how many pips did you catch?”

When we measure the volume of water in our glass, we measure the amount in milliliters. In forex, those milliliters are called pips, or points in percentage.

To explain this further, we will first talk about a currency pair. For example, the:

EUR/USD 1 : 1.11187

The euro is the base currency, while the dollar is the terms currency. The base currency is always equal to 1, the terms or quote currency is the current market rate.

Now, let us break down the market rate for you:

  1. The number before the comma, and the first 2 decimals after the comma, represent the base currency
  2. The 3rd and 4th decimal, represent the pips
  3. The 5th decimal represents the pipette

The pipette is actually so small that it is insignificant compared to the pips. And by now we may come to the point, because every pip up or down is worth a certain amount of value.

So now, let us change the market rate for educational purposes.

If there’s a change in market rate, for example:

We go from 1.11187 up to 1.11387

Then the difference is 20 points in percentage, or 20 pips. Every pip represents an amount of value.

This value depends on your trading volume, or your lot size. Let’s break this also down for you:

SizeTerminologyCurrency unitsValue
1Standard lot100.000€ 10
0,1Mini lot10.000€ 1
0,01Micro lot1000€ 0,10

So, if we had used a 1.0 standard lot, we would have made on 20 pips:

20 pips x €10 = €200

That’s easy money right?

In case of the other lots, we would have made:

Mini lot: 20 pips x €1 = €20
Micro lot: 20 pips x €0,10 = €2

The micro lot is the smallest lot you can trade with and represents 10 cents per pip.

Now, you may ask yourself the following question:


How difficult is it to catch pips?

Well, not so difficult! Especially when you have the right people, information, educators and tools around you who can guide you in this journey. Let us show you some previews:

In this case, you see a yellow figure on the left of the chart, we call that a harmonic pattern. At the right bottom of this figure you see point D. From point D to the top of the chart, we can measure an amount of 1772 pipettes, that’s 172 pips!

If you would have used a standard lot for this trade, you would have earned 172 pips x €10 = €1720. Not bad, right?

Let’s show you another example:

As you can see, this was a trade of 2015 pipettes or 201,5 pips… so that could have been another €2015 over there based on a standard lot!

Besides, it’s also possible to trade with any lot size greater than 0,01 lot. So you can attach each desired value to a pip. Some people trade with 0.02 lot, meaning 20 cents per pip. Soms people trade with 50.00 lot. Meaning €500 per pip. Which means that on a 20 pip move, you would have made €10.000,-!

”The best way to predict the future is to create it.”

Peter Drucker

So, have we aroused your interest?

In the next article we explain what we do at Celebrate Forex, and how you can become the next success story within our unique community.

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