Forex trading isn't too different from other forms of currency trading, so even if you haven't traded FX options before, you should soon feel comfortable when using this particular trading platform. However, unlike trading stocks or shares, Forex trading involves the exchange of different foreign currencies - with the objective being to earn money from the difference between exchange rates.

For example, a trader buying 10,000 euros (EUR) with US dollars (USD) when the exchange rate between the two currencies is 1.1800 could then exchange the euros back when the exchange rate rises to 1.2500 - potentially earning 700 dollars through the exchange. Because Forex trading does not carry charges, you won't have to worry about losing any of this profit to brokers.

Because all Forex trades involve the exchange of two currencies, you will always see currencies listed in pairs - so it can pay to do your research and discover precisely which currencies GBP and JPY refer to, for example. The base currency is the one listed to the left of the pairing - EUR in the example of EUR/USD mentioned earlier - which refers to the currency you are intending to buy. The counter currency, also known as quote currency, is the one you use to buy units of the base currency. This means you are simultaneously selling units of the quote currency, often with the hope of buying them back when their value improves.

There are thus effectively two approaches to Forex trading - buying and selling. Traders may prefer to carry out exchanges based on buying base currency while selling the quote currency - which then requires a wait for the base currency to rise in value. Alternatively, a selling approach would involve selling the base currency and buying the quote currency, then waiting for the base currency to decrease in value so it can be bought back for cheaper.

Once you've got your head around Forex trading, you should find it relatively easy to make exchanges via trading platforms. The final thing to remember is that Forex quotes will list two different prices for currency pairs - the bid price and the ask price. The bid price is set by brokers, and represents the price they are willing to buy currencies from you, whereas the ask price represents the offer price at which you can buy a currency. The ask price is usually higher than the bid price.

The author of this article is a part of a digital blogging team who work with brands like Saxo Bank. The content contained in this article is for information purposes only and should not be used to make any financial decisions.