WHAT IS FOREX (FOREIGN EXCHANGE MARKET)?
In a Simple word we can say that Forex means Exchange the currency of two different countries. The Foreign Exchange market, also referred to as the “Forex” or “Retail forex” or “FX” (Short name) or “Spot FX” or just “Spot” It is the largest financial market in the world, with a volume of over $5++ trillion a day which is about 1000 times more than Malaysia Share Market.
The Forex consists of over 5000 trading bodies including reserve banks, large international banking institutions, commercial companies and brokers.
WHAT IS TRADED IN THE FOREIGN EXCHANGE MARKET?
As we said Forex is exchange of currency so Answer is money of any country which involved in Forex. There are 4 major pairs or blue chips in Forex: Euro against US dollar, US dollar against Japanese yen, British pound against US dollar, and US dollar against Swiss franc which all have symbol or sign as EUR/USD, USD/JPY, GBP/USD, and USD/CHF accordingly.
Please note that Forex currency symbol has total six letters (three letters / three letters), the first two letters of each pair identify the name of the country and the third letter identifies the name of that country’s currency.
For Example AUD/USD which identify Australian Dollar against United State Dollar.
HOW DOES FOREX WORK?
The opportunity for profit is based on the constant fluctuations that occur between currencies. Even minimal changes can produce a substantial gain because of the high amounts of money invested in each trade. Individual investors can trade using ‘leverage’ capital. For example, a leverage ratio of 1:100 allows a trader to control USD100, 000. Please note that the same stands for losses. There are substantial risks involved, however, to protect both the dealer and the trader there are built in risk management tools available to help minimize losses.
The Forex trade starts at financial centers in Sydney and moves on to Tokyo, London, and then New York. Trading is available at any time.
WHAT LEVERAGE REPRESENTS?
Leverage is buying or selling power. The higher the leverage the more quantities a trader can trade. As an example, a leverage of 1:50, allows a trader to trade up to 50 times, his equity value.
WHAT IS MARGIN?
Margin is the amount of funds required to allow a trader to open and maintain a position. As an example, on an account with a leverage of 1:100, the required margin to open and maintain a FOREX position is 1/100 of the value of the position.
WHAT IS A PIP?
A pip is the smallest price fluctuation in a certain instrument or currency pair. This terms applies with a 4 decimal places currency pairs. Also your Profits and losses are connected with the pips.
WHAT DO SHORT AND LONG POSITIONS MEAN?
Traders take short positions to sell currency which they anticipate will drop in price. In this way, the investor may profit if the price declined. Long positions are taken when a trader buys a currency at a low price with the intention of selling it later for a higher price. These moves allow the investor to gain from changing market prices. As currencies are traded in pairs, every Forex position requires the investor to go short in one currency and long in the other.
WHAT ARE THE BENEFITS TO TRADE FOREIGN CURRENCIES?
There are so many benefits and advantages of Forex trading. Few are given below….
Like No commission only spread counts,
Flexible Lot Size which is start from micro lot (0.01) means 1000 Amount of any particular currency ,
Transaction costs are low, 24 X7 open market as it is world wide market so market never sleep,
No manipulation. No any individual can control the market as it is vey huge market,
Leverage is up to 500 times, Highly liquid market , Free practice/ Demo Account for your practice if you are a new to this market And many more…..
These are few reasons why so many people are choosing this market !
WHAT ARE “INTRADAY” AND “OVERNIGHT POSITIONS”?
Intraday positions refer to all positions opened at anytime during the 24 hour period before the close of our business trading hours at 22.00 GMT.
Overnight positions are positions that are still on after our usual trading hours. These are automatically rolled over by us.
HOW MUCH AMOUNT NEEDED TO TRADE FOREX?
Forex trading account may open with as little as 100 USD for micro lot trading account, but we recommend to start with at least 1000 US dollar for good money management. If you want to trade in Mini and standard lot we suggest you kindly go for 5000 USD.
HOW DO I MANAGE RISK?
The most frequently used risk management tools in Forex trading are stop-loss and limit orders. The stop-loss order automatically liquidates a position at a chosen price.
This prevents any possible movements against the position beyond the chosen level. Please note that in case of irregular or adverse market movements, a trade maybe stopped beyond the stop loss level.
DO I PAY ANY INTEREST ON MY OPEN POSITIONS MORE THAN 1 DAY?
In CFDs and in Forex such interest is called Swap or roll-over fees. Depending on the currency pair your are trading and on the direction of the trade, normal trading accounts may pay or earn swaps. Please check your market watch for more details.
WHAT TRADING STRATEGIES ARE USEFUL?
Traders should consider the prevailing economic conditions and take into account the various financial reports and analysis available. Technical traders rely on trends, support and resistance levels in conjunction with analytical data to identify trading opportunities.
Significant unexpected events can drive price movements such as a sudden change in interest rates or a major political crisis. Often it is the expectation of an event rather than the event itself that influences price movement.
NOTES:
* In dollar cents.
The spreads above are the typical initial spreads that are available for the two account types.
Please note that during extreme market conditions or during low or vigorous activity, spreads may change. You will see this change in the market watch, or on the order ticket, when you try to open or close a position.
All positions left open from 23:59:45 to 23:59:59 (Server time) will be rolled over with swap depending on account type.
For all pairs above, each lot represents a size of 100,000 units, except for Silver, Gold and Oil, each lot is equal to 5000, 100 and 1000 units respectively.
If you new to Forex, we encourage you learning here ( www.babypips.com ).
Click here to start Demo Account. ( www.gdmfx.com?cg=8023805 ).
