Trade Forex Trading

Start Forex Trading - Introduction To Forex Trading

The following foundational knowledge constitutes the necessary introductory material for prospective Forex traders.

What is Forex?

Forex or Market is the largest financial market in the world where currencies are traded and exchanged so as to facilitate international trade. The forex market trades a daily turnover of $7.2 trillion dollars per day. However, even though Forex is carried out mainly to facilitate international trade, 95% of all the market participants are speculators and traders who trade the market so as to make profits from the currency price moves.

Basic Forex Trading Terms

Forex

Also known as FX, Currency Market or market and this term is used to describe the market.

Currency Pair

FX Currencies are bought and sold in groups of two commonly called Forex Pair. For example, the EURO and the US Dollar currency pair is written as EURUSD. A trader wanting to change EUROs into US Dollars will be trading with this currency pair EURUSD.

Currency Exchange Rate

The exchange rate defines the price at which one currency is valued against another. This rate is essential for determining the equivalence when exchanging one currency for another. For instance, an EUR/USD exchange rate of 1.2500 indicates that a trader will exchange 1 EURO for 1.2500 US Dollars.

Pip

A Pip means Point in Percentage, and it is how we measure changes in forex pair prices. A pip is how much the price of one currency changes compared to another. A pip is the smallest amount the price of a currency can go up or down. For example, if the EURUSD exchange rate is 1.2500, and it moves 1 pip, the new rate will be 1.2501 - the pip is the last number here, and it's worth 0.0001. A pip is one-hundredth of one cent, so if the price moves 100 pips, that's the same as 1 cent.

Ask price

Ask price is what you pay to buy a currency. It's the rate the market offers to sell at.

Bid price

Bid price - this is the price at which a trader sell a currency at. This is also the price at which the currency market is willing to buy a currency from you as a trader

Spreads

Spread is the difference between ask price and bid price.

Why Trade Forex

What are the benefits of trading Forex and why should traders trade the market.

24 Hour Market

The Forex market operates continuously, open 24 hours a day, five and a half days per week. This accessibility means traders have the flexibility to trade at any hour, day or night, and can initiate or terminate trades whenever desired, given the Forex market's 24-hour availability.

Liquidity

FX represents the world's largest financial market. Its massive daily trading volume bestows upon it the status of the most liquid financial trading market globally. This liquidity implies that a trader possesses the ability to initiate a buy or sell position in the market at any given moment.

The Market Cannot be Cornered

The market turns over $7.2 trillion daily. No one player can control it. Even big banks or governments can't hold it long. This makes it a good spot for retail traders and speculators.

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