What is Forex
WHAT AM I DOING WHEN operated FOREX?
Forex is an abbreviation commonly used for "foreign exchange" or "currency exchange" and is often used to describe the trading in the forex market by investors and speculators.
For example, imagine a situation in which it is expected that the value of the US dollar it will weaken against the euro. A forex trader in this situation will sell dollars and buy euros. If the euro strengthens, the purchasing power to buy dollars has increased. The trader now can buy back more dollars than they had to begin making a profit.
This is similar to stock trading. A stockbroker buy a stock if you think the price will increase in the future and will sell a stock if you think its price will fall in the future. Similarly a forex trader will buy a currency pair if you expect the exchange rate to increase in the future and sell a currency pair if you expect the exchange rate to fall in the future.
WHAT IS AN EXCHANGE RATE?
The forex market is a global and decentralized market determines the relative values of different currencies. Unlike other markets, there is no central repository or exchange where transactions are carried out. Instead, these operations are performed by various market participants in various places. It is rare for two coins have an identical value to each other and also rare that two currencies remain the same relative value for more than a short period of time. In Forex, the exchange rate between two pairs of currency changes constantly.
For example, the January 3, 2011, one euro was worth about $ 1.33. On May 3, 2011, one euro was worth about $ 1.48. The euro has appreciated 10% against the dollar US during this time.
WHY CHANGE EXCHANGE RATES?
Currencies are traded in an open market such as stocks, bonds, computers, cars and many other goods and services. The value of a currency fluctuates as its supply and demand fluctuates, just like anything else.
An increase in supply or a reduction in demand for currency may cause the value of the currency falls.
A decrease in supply or increased demand for currency may cause the value of the currency is increased.
A great benefit of Forex trading is that you can buy or sell a currency pair at any time, subject to availability of liquidity. So if you think the euro zone will separate, you can sell the euro and buy dollars (sell EUR / USD). If you think the gold price will go up, based on the historical correlation patterns, you can buy and sell Australian dollar US dollar (Buy AUD / USD).
This also means that in reality there is no "bear market" in the traditional sense. You can win (or lose) money when the market is trending to the upside or on the downside.
Why Trade Forex?
The online forex trading has become very popular in the last decade because it offers a number of advantages:
THE FOREX MARKET DOES NOT SLEEP
The trading goes around the world during different times of markets in different countries. Therefore, you can operate the most popular currency at any time, 24 hours a day. Since there is no specific timetable for appointing exchange rates, there is something going on almost every moment of the day and night. 1
You can go long or short
Unlike many other financial markets, where it can be difficult to take short positions, there is no limitation to go short on coins. If you think a currency is on the rise, buy. If you think you're going to fall, sell it. This means that there is no such thing as a "bear market" in forex - you can make (or lose) money at any time.
Low transaction costs
Most forex accounts without commissions operate without expensive license fees or data. The cost of trading is the spread between the buying price and the selling price, always available on screen trading.
LIQUIDITY INIGUALABLE
Since the forex market is a market of $ 4 trillion a day, mostly concentrated in only a few currencies, there are always many people operate. This typically makes it easy to enter and exit operations at any time, even with larger amounts.
LEVERAGE AVAILABLE
Because of the deep liquidity in the forex market, you can operate with considerable level of leverage (100: 1). This allows you to leverage even small market movements. Leverage is a double-edged sword, of course, because it can substantially increase gains and losses.
INTERNATIONAL EXHIBITION
As that the world is becoming more global, investors seek opportunities wherever they can. If you want to take a general view and invest in another country (or sell short), forex is an easy way to gain exposure while avoiding the vagaries as the laws of rate change and the financial statements in different languages.
Basic concepts
Learn to trade forex is like learning a new language. It is easier when you have a good vocabulary and concepts and basic ideas are understood. So, let's start with the basics of forex before learning to use the Trading Station platform. For a more thorough introduction to the forex market.
What is Forex?
Forex is the common abbreviation of "foreign exchange" or "currency exchange". This typically involves buying and selling currencies on the market, especially among investors and speculators. The familiar expression "buy low and sell high" applies to currency trading. A forex trader purchasing currencies that are undervalued and sells coins that are over-valued, as does a trader buys shares when a stock is undervalued and sell when the market is over-valued.
HOW TO READ A QUOTE?
Forex quotes are always presented in pairs because one currency is compared against another. This can be confusing at first, but it's pretty intuitive. For example, the EUR / USD at 1.4022 shows how much a euro (EUR) US dollar (USD).
WHAT IS A LOT?
It is the smaller size of transaction. FXCM accounts have a lot micro 1,000 currency units. The owners of the accounts can place orders of different sizes while maintaining increases in 1000 as 2,000, 3,000, 15,000, 112,000, etc.
What is a PIP?
A pip is the unit in which the gains or losses are counted. Most currency pairs, except the Japanese yen, quoted to four decimal points. The fourth space after the decimal point (in a 100th of a cent) is typically what you look for counting "pips". Each point moving in that place is a movement of 1 pip. For example, if the EUR / USD rises to 1.4022 a1.4027 it is up 5 pips.
WHAT IS THE LEVERAGE / MARGIN?
As mentioned above, all operations are executed with borrowed money. This allows you to benefit from leverage. The 100: 1 leverage allows you to trade with $ 1,000 in the market putting aside only $ 5 as a security deposit. This means you can take smaller movements in the currencies market controlling more capital in the market which effectively takes into the account.
Leverage can dramatically increase both their profits and losses. The trading on margin carries a high level of risk and may not be suitable for you as they could suffer losses that exceed your deposit. Therefore, it should be used with caution. Trading foreign exchange with any level of leverage may not be suitable for all investors. The specific amount that you are required to put aside to maintain a position known as the margin requirement. The margin can be considered a good faith deposit required to maintain open positions. It is not a fee or a transaction cost, it is simply a part of its capital which is reserved aside and allocated as a margin deposit.