Start Forex Trading - Introduction To Forex Trading
The following are the basics that traders should learn as an introduction to Forex trading.
What's Forex?
Forex or Market is the largest financial market in the world where currencies are traded and exchanged in order 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 in order to make profits from the currency price movements.
Basic Forex Trading Terms
Forex
Also known as FX, Currency Market or market and this term is used to describe the market.
Currency Pair
Forex Currencies are traded in pairs of two commonly known as Currency Pair. For example the EURO and the US Dollar currency pair is denoted as EURUSD. A trader wanting to exchange EUROs for US Dollars will be trading this currency pair EURUSD.
Currency Exchange Rate
The exchange rate is the price at which one currency is quoted against another currency. This exchange rate determines how much one currency will be exchanged for compared to another currency. For Example a EURUSD exchange rate of 1.2500 means that a trader will exchange 1 EURO for 1.2500 US Dollars.
Pip
Pip means Price Interest Point & this is the unit used to calculate forex pair moves. A pip is a one point movement in the exchange rate of a currency. A pip is the minimum price increase in the exchange rate of a currency. For example in EURUSD exchange rate is 1.2500 and the currency moves 1 pip then this will mean the current exchange rate will now be 1.2501 - the pip is the last point in this example & can be denoted as 0.0001. A pip is one hundredth of 1 cent, therefore 100 pips movement is equivalent to 1 cent.
Ask price
Ask price - this is the price at which a trader can buy a currency at. This is also the price at which the currency market is willing to sell a currency to you as a trader.
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
Forex is a 24 hour market, that is open 24 hours a day, 5 and a half days a week. This means that traders can trade the market at any time of the day or night and can open trades & close trades at any time that they want to because Forex is open 24 hours a day.
Liquidity
Forex is the largest financial market in the world and its enormous volume of daily trade turnover makes the market the most liquid financial market in the world. What this means is that a trader can open a buy or sell trade in the market at any time.
The Market Cannot be Cornered
Due to the size of the market daily turnover of $7.2 trillion dollars no single player in the Market can corner the market. Even the big banks and Governments cannot corner the market for a long period of time. This makes the Market a great place to trade for retail traders and speculators.
