Forex for a trader
What is forex trading

What is forex tradingForex for Beginners – What is Forex? Here you’ll find forex explained in simple terms. If you’re new to forex trading, we’ll take you through the basics of forex pricing and placing your first forex trades. ‘Forex’ is short for foreign exchange, also known as FX or the currency market. It is the world’s largest form of exchange, trading around $4 trillion every day, and it is open to major institutions and individual investors alike. The aim of forex trading is simple. Just like any other form of speculation, you want to buy a currency at one price and sell it at higher price (or sell a currency at one price and buy it at a lower price) in order to make a profit. Some confusion can arise as the price of one currency is always, of course, determined in another currency. For instance, the price of one British pound could be measured as, say, two US dollars, if the exchange rate between GBP and USD is 2 exactly. In forex trading terms this value for the British pound would be represented as a price of 2.0000 for the forex pair GBPUSD. Currencies are grouped into pairs to show the exchange rate between the two currencies; in other words, the price of the first currency in the second currency. Some commonly traded forex pairs (known as ‘major’ pairs) are EURUSD, USDJPY and EURGBP, but it is also possible to trade many minor currencies (also known as ‘exotics’) such as the Mexican peso (MXN), the Polish zloty (PLN) or the Norwegian krone (NOK). As these currencies are not so frequently traded the market is less liquid and so the trading spread may be wider. Forex trading spread. Like any other trading price, the spread for a forex pair consists of a bid price at which you can sell (the lower end of the spread) and an offer price at which you can buy (the higher end of the spread). It is important to note, however, for each forex pair, which way round you are trading.

When buying, the spread always reflects the price for buying the first currency of the forex pair with the second. So an offer price of 1.3000 for EURUSD means that it will cost you $1.30 to buy €1. You would buy if you think that the price of the euro against the dollar is going to rise, that is, if you think you will later be able to sell your €1 for more than $1.30. When selling, the spread gives you the price for selling the first currency for the second. So a bid price of 1.3000 for EURUSD means that you can sell €1 for $1.30. You would sell if you think that the price of the euro is going to fall against the dollar, so you can buy back your €1 for less than the $1.30 you originally paid for it. Calculating your profit. Take another example. Suppose the spread for EURGBP is 0.8414-0.8415. If you think the price of the euro is going to rise against the pound you would buy euros at the offer price of 0.8415 per euro. Say in this case you buy €10,000 at a cost to you of ?8415. The spread for EURGBP rises to 0.8532-0.8533 and you decide to sell your euros back into pounds at the bid price of 0.8532. The €10,000 you previously bought is now therefore sold for ?8532.

Your profit on this transaction is ?8532 minus the original cost of buying the euros (?8415) which is ?117. Note that your profit is always determined in the second currency of the forex pair. Alternatively, suppose in the first instance you think the price of the euro is going to fall, and you decide to sell €10,000 at the original bid price of 0.8414, for ?8414. In this case you are right and the spread for EURGBP falls to 0.8312-0.8313. You decide to buy back your €10,000 at the offer price of 0.8313, a cost of ?8313. The cost of buying back the euros is ?111 less than you originally sold the euros for, so this is your profit on the transaction. Again your profit is determined in the second currency of the forex pair. Spread betting or CFD trading. InterTrader provides two different vehicles for trading forex: spread betting and CFDs. Both of these products allow you to speculate on the movements of currency markets without making a physical trade, but they operate in slightly different ways. With spread betting you stake a certain amount (in your account currency) per pip movement in the price of the forex pair. So for instance you might buy (or sell) ?10 per pip on USDJPY, to make ?10 for every pip the US dollar rises (or falls) against the Japanese yen. Forex traders have been using spread betting to capitalise on short-term movements for many years now. Find out more about spread betting.

With CFDs you buy or sell contracts representing a given size of trade. So you might decide to buy 1 contract of GBPUSD, which (with InterTrader) represents a trade of ?10,000. Your profit or loss is calculated in the second currency, in this case US dollars, and then converted (if necessary) into your account currency. Find out more about CFDs. Either way you don’t have to provide the full currency value to open your position. Instead you put down a margin deposit, which is a fraction of the full value. And you don’t actually buy or sell any currency: you are opening a speculative position on the change in value of the forex pair. Your profit or loss is realised when you close your position by selling or buying. Forex Tutorial: What is Forex Trading? What Is Forex? The foreign exchange market is the "place" where currencies are traded.

Currencies are important to most people around the world, whether they realize it or not, because currencies need to be exchanged in order to conduct foreign trade and business. If you are living in the U. S. and want to buy cheese from France, either you or the company that you buy the cheese from has to pay the French for the cheese in euros (EUR). This means that the U. S. importer would have to exchange the equivalent value of U. S. dollars (USD) into euros. The same goes for traveling. A French tourist in Egypt can't pay in euros to see the pyramids because it's not the locally accepted currency. As such, the tourist has to exchange the euros for the local currency, in this case the Egyptian pound, at the current exchange rate. The need to exchange currencies is the primary reason why the forex market is the largest, most liquid financial market in the world. It dwarfs other markets in size, even the stock market, with an average traded value of around U. S. $2,000 billion per day. (The total volume changes all the time, but as of August 2012, the Bank for International Settlements (BIS) reported that the forex market traded in excess of U. S. $4.9 trillion per day.) One unique aspect of this international market is that there is no central marketplace for foreign exchange. Rather, currency trading is conducted electronically over-the-counter (OTC), which means that all transactions occur via computer networks between traders around the world, rather than on one centralized exchange. The market is open 24 hours a day, five and a half days a week, and currencies are traded worldwide in the major financial centers of London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris and Sydney - across almost every time zone.

This means that when the trading day in the U. S. ends, the forex market begins anew in Tokyo and Hong Kong. As such, the forex market can be extremely active any time of the day, with price quotes changing constantly. Spot Market and the Forwards and Futures Markets There are actually three ways that institutions, corporations and individuals trade forex: the spot market, the forwards market and the futures market. The forex trading in the spot market always has been the largest market because it is the "underlying" real asset that the forwards and futures markets are based on. In the past, the futures market was the most popular venue for traders because it was available to individual investors for a longer period of time. However, with the advent of electronic trading and numerous forex brokers, the spot market has witnessed a huge surge in activity and now surpasses the futures market as the preferred trading market for individual investors and speculators. When people refer to the forex market, they usually are referring to the spot market. The forwards and futures markets tend to be more popular with companies that need to hedge their foreign exchange risks out to a specific date in the future. What is the spot market? More specifically, the spot market is where currencies are bought and sold according to the current price. That price, determined by supply and demand, is a reflection of many things, including current interest rates, economic performance, sentiment towards ongoing political situations (both locally and internationally), as well as the perception of the future performance of one currency against another.

When a deal is finalized, this is known as a "spot deal". It is a bilateral transaction by which one party delivers an agreed-upon currency amount to the counter party and receives a specified amount of another currency at the agreed-upon exchange rate value. After a position is closed, the settlement is in cash. Although the spot market is commonly known as one that deals with transactions in the present (rather than the future), these trades actually take two days for settlement. What are the forwards and futures markets? Unlike the spot market, the forwards and futures markets do not trade actual currencies. Instead they deal in contracts that represent claims to a certain currency type, a specific price per unit and a future date for settlement. In the forwards market, contracts are bought and sold OTC between two parties, who determine the terms of the agreement between themselves. In the futures market, futures contracts are bought and sold based upon a standard size and settlement date on public commodities markets, such as the Chicago Mercantile Exchange. In the U. S., the National Futures Association regulates the futures market. Futures contracts have specific details, including the number of units being traded, delivery and settlement dates, and minimum price increments that cannot be customized.

The exchange acts as a counterpart to the trader, providing clearance and settlement. Both types of contracts are binding and are typically settled for cash for the exchange in question upon expiry, although contracts can also be bought and sold before they expire. The forwards and futures markets can offer protection against risk when trading currencies. Usually, big international corporations use these markets in order to hedge against future exchange rate fluctuations, but speculators take part in these markets as well. Note that you'll see the terms: FX, forex, foreign-exchange market and currency market. These terms are synonymous and all refer to the forex market. What is Forex Trading? > What is Forex Trading? Forex Trading also known as the Foreign Exchange market or the FX market is the largest financial market in the world, with an average of $5 trillion daily turnover. Forex became trending thanks to its availability and accessibility that allow traders to access the exchange market whenever they want and trade with simple clicks. Forex trading, not a big secret anymore. Yet, it is important to know the foundation before actually start trading with our unique platform. The foundation, we are talking about here, include the different terms which are different from other trading environments such as cryptocurrencies. These terminologies are important as they provide a clear understanding of what this type of trading is. Here are few terms: Bid Price: The bid price is the current highest price the market is offering to buy an underlying asset.

Ask Price: It is the current lowest price the market is offering to sell an underlying asset. Spread: The spread is known as the difference between the BID and the ASK price of a particular asset. Leverage: The leverage amount provides the ability for traders to benefit from even the smaller market fluctuations without risking big capitals. Pips: This is the smallest price movement a currency can make. A PIP is calculated on the fourth decimal place on BinaryOnline. Tick Value: The smallest change in value in the last decimal place. A tick is basically 110 of a PIP and it is calculated on the fifth decimal place. R. Margin: Required Margin is the minimum investment amount required to enter a trade. Strike Price: (Bid price + Ask price) 2. Besides, the terms, it is also important to know that Forex trading greatly depends on the fluctuations in the price of specific assets. Currency pairs are the most traded asset traded under the Forex market.

However, at BinaryOnline, we made it possible to trade more than 200 assets the forex way. The pairs consist of the base currency and quote currency. How to read a currency pair, let’s take the EURUSD pair for instance. Here, EUR = Base currency ; USD = Quote currency. As such, if the EURUSD is at 1.1400. This means that you need to have US $1.1400 to buy one euro. In the forex market, we have three categories of Forex pairs, including Major pairs, Minor pairs and Exotic pairs. Major pairs are the most liquid and widely traded currency pairs in the world, and mainly consist of the US dollar-quoted with another currency. Exotic currency pairs are made up with one major or most traded currency which is paired with the currency of an emerging economy. The table below depicts some example of currency pairs from each of the three categories. US Search Mobile Web. Welcome to the Yahoo Search forum! We’d love to hear your ideas on how to improve Yahoo Search . The Yahoo product feedback forum now requires a valid Yahoo ID and password to participate.

You are now required to sign-in using your Yahoo email account in order to provide us with feedback and to submit votes and comments to existing ideas. If you do not have a Yahoo ID or the password to your Yahoo ID, please sign-up for a new account. If you have a valid Yahoo ID and password, follow these steps if you would like to remove your posts, comments, votes, andor profile from the Yahoo product feedback forum. Part 1: What Is Forex Trading ? – A Definition & Introduction. An Introduction to FOREX Trading: This free Forex mini-course is designed to teach you the basics of the Forex market and Forex trading in a non-boring way. I know you can find this information elsewhere on the web, but let’s face it; most of it is scattered and pretty dry to read. I will try to make this tutorial as fun as possible so that you can learn about Forex trading and have a good time doing it. Upon completion of this course you will have a solid understanding of the Forex market and Forex trading, and you will then be ready to progress to learning real-world Forex trading strategies. What is the Forex market? • What is Forex? – The basics…

Basically, the Forex market is where banks, businesses, governments, investors and traders come to exchange and speculate on currencies. The Forex market is also referred to as the ‘Fx market’, ‘Currency market’, ‘Foreign exchange currency market’ or ‘Foreign currency market’, and it is the largest and most liquid market in the world with an average daily turnover of $3.98 trillion. The Fx market is open 24 hours a day, 5 days a week with the most important world trading centers being located in London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris, and Sydney. It should be noted that there is no central marketplace for the Forex market; trading is instead said to be conducted ‘over the counter’; it’s not like stocks where there is a central marketplace with all orders processed like the NYSE. Forex is a product quoted by all the major banks, and not all banks will have the exact same price. Now, the broker platforms take all theses feeds from the different banks and the quotes we see from our broker are an approximate average of them. It’s the broker who is effectively transacting the trade and taking the other side of it…they ‘make the market’ for you. When you buy a currency pair…your broker is selling it to you, not ‘another trader’. • A brief history of the Forex market. Ok, I admit, this part is going to be a little bit boring, but it’s important to have some basic background knowledge of the history of the Forex market so that you know a little bit about why it exists and how it got here. So here is the history of the Forex market in a nutshell: In 1876, something called the gold exchange standard was implemented. Basically it said that all paper currency had to be backed by solid gold; the idea here was to stabilize world currencies by pegging them to the price of gold. It was a good idea in theory, but in reality it created boom-bust patterns which ultimately led to the demise of the gold standard. The gold standard was dropped around the beginning of World War 2 as major European countries did not have enough gold to support all the currency they were printing to pay for large military projects. Although the gold standard was ultimately dropped, the precious metal never lost its spot as the ultimate form of monetary value.

The world then decided to have fixed exchange rates that resulted in the U. S. dollar being the primary reserve currency and that it would be the only currency backed by gold, this is known as the ‘Bretton Woods System’ and it happened in 1944 (I know you super excited to know that). In 1971 the U. S. declared that it would no longer exchange gold for U. S. dollars that were held in foreign reserves, this marked the end of the Bretton Woods System. It was this break down of the Bretton Woods System that ultimately led to the mostly global acceptance of floating foreign exchange rates in 1976. This was effectively the “birth” of the current foreign currency exchange market, although it did not become widely electronically traded until about the mid 1990s. (OK! Now let’s move on to some more entertaining topics!)… What is Forex Trading? Forex trading as it relates to retail traders (like you and I) is the speculation on the price of one currency against another. For example, if you think the euro is going to rise against the U. S. dollar, you can buy the EURUSD currency pair low and then (hopefully) sell it at a higher price to make a profit. Of course, if you buy the euro against the dollar (EURUSD), and the U. S. dollar strengthens, you will then be in a losing position. So, it’s important to be aware of the risk involved in trading Forex, and not only the reward. • Why is the Forex market so popular? Being a Forex trader offers the most amazing potential lifestyle of any profession in the world. It’s not easy to get there, but if you are determined and disciplined, you can make it happen.

Here’s a quick list of skills you will need to reach your goals in the Forex market: Ability – to take a loss without becoming emotional. Confidence – to believe in yourself and your trading strategy, and to have no fear. Dedication – to becoming the best Forex trader you can be. Discipline – to remain calm and unemotional in a realm of constant temptation (the market) Flexibility – to trade changing market conditions successfully. Focus – to stay concentrated on your trading plan and to not stray off course. Logic – to look at the market from an objective and straight forward perspective. Organization – to forge and reinforce positive trading habits. Patience – to wait for only the highest-probability trading strategies according to your plan. Realism – to not think you are going to get rich quick and understand the reality of the market and trading. Savvy – to take advantage of your trading edge when it arises and be aware of what is happening in the market at all times. Self-control – to not over-trade and over-leverage your trading account. As traders, we can take advantage of the high leverage and volatility of the Forex market by learning and mastering and effective Forex trading strategy, building an effective trading plan around that strategy, and following it with ice-cold discipline. Money management is key here; leverage is a double-edged sword and can make you a lot of money fast or lose you a lot of money fast. The key to money management in Forex trading is to always know the exact dollar amount you have at risk before entering a trade and be TOTALLY OK with losing that amount of money, because any one trade could be a loser.

More on money management later in the course. • Who trades Forex and why? Banks – The interbank market allows for both the majority of commercial Forex transactions and large amounts of speculative trading each day. Some large banks will trade billions of dollars, daily. Sometimes this trading is done on behalf of customers, however much is done by proprietary traders who are trading for the bank’s own account. Companies – Companies need to use the foreign exchange market to pay for goods and services from foreign countries and also to sell goods or services in foreign countries. An important part of the daily Forex market activity comes from companies looking to exchange currency in order to transact in other countries. Governments Central banks – A country’s central bank can play an important role in the foreign exchange markets. They can cause an increase or decrease in the value of their nation’s currency by trying to control money supply, inflation, and (or) interest rates. They can use their substantial foreign exchange reserves to try and stabilize the market. Hedge funds – Somewhere around 70 to 90% of all foreign exchange transactions are speculative in nature. This means, the person or institutions that bought or sold the currency has no plan of actually taking delivery of the currency; instead, the transaction was executed with sole intention of speculating on the price movement of that particular currency. Retail speculators (you and I) are small cheese compared to the big hedge funds that control and speculate with billions of dollars of equity each day in the currency markets. Individuals – If you have ever traveled to a different country and exchanged your money into a different currency at the airport or bank, you have already participated in the foreign currency exchange market. Investors – Investment firms who manage large portfolios for their clients use the Fx market to facilitate transactions in foreign securities.

For example, an investment manager controlling an international equity portfolio needs to use the Forex market to purchase and sell several currency pairs in order to pay for foreign securities they want to purchase. Retail Forex traders – Finally, we come to retail Forex traders (you and I). The retail Forex trading industry is growing everyday with the advent of Forex trading platforms and their ease of accessibility on the internet. Retail Forex traders access the market indirectly either through a broker or a bank. There are two main types of retail Forex brokers that provide us with the ability to speculate on the currency market: brokers and dealers. Brokers work as an agent for the trader by trying to find the best price in the market and executing on behalf of the customer. For this, they charge a commission on top of the price obtained in the market. Dealers are also called market makers because they ‘make the market’ for the trader and act as the counter-party to their transactions, they quote a price they are willing to deal at and are compensated through the spread, which is the difference between the buy and sell price (more on this later). Advantages of Trading the Forex Market: • Forex is the largest market in the world, with daily volumes exceeding $3 trillion per day. This means dense liquidity which makes it easy to get in and out of positions. • Trade whenever you want: There is no opening bell in the Forex market. You can enter or exit a trade whenever you want from Sunday around 5pm EST to Friday around 4pm EST. • Ease of access: You can fund your trading account with as little as $250 at many retail brokers and begin trading the same day in some cases. Straight through order execution allows you to trade at the click of a mouse. • Fewer currency pairs to focus on, instead of getting lost trying to analyze thousands of stocks. • Freedom to trade anywhere in the world with the only requirements being a laptop and internet connection. • Commission-free trading with many retail market-makers and overall lower transaction costs than stocks and commodities.

• Volatility allows traders to profit in any market condition and provides for high-probability weekly trading opportunities. Also, there is no structural market bias like the long bias of the stock market, so traders have equal opportunity to profit in rising or falling markets. While the forex market is clearly a great market to trade, I would note to all beginners that trading carries both the potential for reward and risk. Many people come into the markets thinking only about the reward and ignoring the risks involved, this is the fastest way to lose all of your trading account money. If you want to get started trading the Fx market on the right track, it’s critical that you are aware of and accept the fact that you could lose on any given trade you take. What is forex trading. We use cookies, and by continuing to use this site or clicking "Agree" you agree to their use. Full details are in our Cookie Policy. Take advantage of Cryptocurrency volatility without owning it. Other Trading Markets. Trading Platforms and Tools. Learn more about managing your account following the introduction of the new ESMA regulations in our FAQs.

What Is Forex Trading. Forex is also known as foreign exchange or FX trading and is one the world's most widely traded markets, with $5 trillion traded every day. FX trading allows you to speculate on price movements in the global currency market. What is Forex trading? FX trading allows you to speculate on the changes in currency strengths over time, trading currencies and buying or selling one against the other. Forex traders seek to profit from fluctuations in the exchange rates between currencies, speculating on whether one currency's value, like the pound sterling, will go up or down in relation to another, such as the US dollar. With over 5 trillion dollars’ worth of currencies traded globally every day, the foreign exchange market is the most traded in the world, making it a highly liquid and dynamic market. This high market liquidity means that prices can change rapidly in response to news and short-term events, creating multiple trading opportunities for retail FX traders. Why is leveraged Forex trading popular with investors? Trade on rising and falling markets trade on falling markets (going short) as well as rising markets (going long) Leveraged product use a small amount of money to control a much larger position Volatility currency prices are constantly fluctuating with each other offering frequent trading opportunities 24 hour trading an OTC product, not restricted to physical exchange hours Liquidity spreads tend to remain tight meaning your dealing costs remain low. How does Forex trading work?

Forex is always quoted in pairs, in terms of one currency versus another. Take for example GBPUSD (sterling vs US dollar) - the fluctuations in the exchange rate between these two is where a trader looks to make their profit. The first currency, also known as the base is the one that you think will go up or down against the second currency, which is known as the quote. When trading currencies, you can speculate on the future direction of the market, taking either a long (buy) or short (sell) position depending on whether you think the currency’s value will go up or down. Forex price movements are triggered by currencies either appreciating in value (strengthening) or depreciating in value (weakening). Example of the Euro Dollar pair. The Euro is the base currency and the US Dollar is the quote. If the price of the EURUSD pair is 1.06325 it means that 1 euro is equal to 1.06325 dollars. If the number increases , this means that the Euro is getting stronger compared to the US Dollar. If the number decreases , this means that the US Dollar is getting stronger compared to the Euro. When trading currencies, you would buy a currency pair if you believed that the base currency will strengthen against the counter currency, or the quote currency will weaken against the base currency. So, if we think that the Euro will strengthen against the US Dollar then we would place a buy trade or go long. For every point, or pip, the Euro rises against the Dollar, we will make a profit. It is important to remember that should the price of the euro weaken against the US Dollar, we would make a loss for every pip it falls. Alternatively, you would sell a currency pair if you believed that the base currency will weaken in value against the counter currency.

If we think the Euro will decrease in value against the US Dollar we would place a sell trade and for every pip the Euro falls against the US Dollar you will make a profit. Should the value of the euro rise against the dollar then you will make a loss for each pip it rises. Forex is a margined product. Also known as leveraged trading, this means you can put up a small amount of money to control a much larger amount. This means you can leverage your money further but it also means that losses will be magnified as well, so you should manage your risk accordingly – please ensure that you fully understand the risks of leveraged trading. Which currency pairs? Commonly traded currency pairs are traditionally divided into three groups related to popularity and liquidity: majors, minors and exotics. At City Index, you can trade over 65 currency pairs including majors, minors and exotics. These are the most liquid currencies (most actively traded) constituting about 85% of total trading volume in the FX markets. The spreads for these are usually tighter compared to the less traded minor currency pairs. These are not traded as heavily as the major currencies, and so tend to fluctuate more often. Spreads for minor currency pairs also tend to be wider due to the medium sized liquidity in the market, as compared to major currency pairs. These are currency pairs that are only very rarely traded.

Due to the low volumes of trade, exotic currency pairs are illiquid and tend to be expensive to trade with wider spreads. Many traders view exotic currency pairs as having higher risk profiles compared to commonly traded currency pairs. Is Forex trading right for me? Forex trading is ideal for investors who want the opportunity to trade on a market that is open 24 hours a day, while at the same time minimizing trading costs and potentially profitting from markets that are rising or falling. However, it contains significant risks to your money and is not suitable for everyone. We strongly suggest trading on a demo account before you try it with your own money. Forex trading is ideal for people who are: Looking for short term opportunities. FX prices are also influenced by economic and political conditions, such as interest rates, inflation, and political instability, such conditions usually have only a short-term impact, so FX trades are typically held open for a few days or weeks, rather than over the longer term. Who want to make their own decisions on what to invest in. City Index provides an execution only service. We do not advise you on what to trade on, and do not trade on your behalf. Looking to diversify their portfolio. City Index offers access to FX markets which are otherwise difficult or costly for the retail investor to access. Be as active or passive as they want. You can trade as little or as often as you want. Trade Forex with City Index. Trading with us. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Spread Betting, CFD Trading and Forex Trading are leveraged products. and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning. * Spread Betting and CFD Trading are exempt from UK stamp duty. Spread betting is also exempt from UK Capital Gains Tax. However, tax laws are subject to change and depend on individual circumstances. Please seek independent advice if necessary.

† 1 point spreads available on the UK 100, Germany 30, France 40 and Australia 200 during market hours on daily funded trades & daily future spread bets and CFDs (excluding futures). ‡ Voted Best Spread Betting Platform 2017 by ADVFN & Best Spread Betting Provider at the Shares Awards 2017. Voted best CFD Provider, best Mobile application, and best Cryptocurrency Trading Platform at the Online Personal Wealth Awards 2018. ? We have won “Best MT4 Broker” at the UK Forex Awards 2017. City Index is a trading name of GAIN Capital UK Limited. Head and Registered Office: Park House, 16 Finsbury Circus, London, EC2M 7EB. GAIN Capital UK Ltd is a company registered in England and Wales, number: 1761813. Authorised and Regulated by the Financial Conduct Authority. FCA Register Number: 113942. VAT number: 524837435. City Index and City Trading are trademarks of GAIN Capital UK Ltd. The information on this website is not targeted at the general public of any particular country.

It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. © 2018 City Index. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. The Basics Of Currency Trading. The investment markets can quickly take the money of investors who believe that trading is easy. Trading in any investment market is exceedingly difficult, but success first comes with education and practice. So, what is currency trading and is it right for you? The currency market, or forex (FX), is the largest investment market in the world, and continues to grow annually.

On April 2010, the forex market reached $4 trillion in daily average turnover, an increase of 20% since 2007. In comparison, there is only $25 billion of daily volume on the New York Stock Exchange (NYSE). The market may be large, but until recently the volume came from professional traders, but as currency trading platforms have improved more retail traders have found forex to be suitable for their investment goals. How Does It Work? Currency trading is a 24-hour market that is only closed from Friday evening to Sunday evening, but the 24-hour trading sessions are misleading. There are three sessions that include the European, Asian and United States trading sessions. Although there is some overlap in the sessions, the main currencies in each market are traded mostly during those market hours. This means that certain currency pairs will have more volume during certain sessions. Traders who stay with pairs based on the dollar will find the most volume in the U. S. trading session. Currency is traded in various sized lots.

The micro lot is 1,000 units of a currency. If your account is funded in U. S. dollars, a micro lot represents $1,000 of your base currency, the dollar. A mini lot is 10,000 units of your base currency and a standard lot is 100,000 units. Pairs and Pips All currency trading is done in pairs. Unlike the stock market, where you can buy or sell a single stock, you have to buy one currency and sell another currency in the forex market. Next, nearly all currencies are priced out to the fourth decimal point. A pip or percentage in point, is the smallest increment of trade. One pip typically equals 1100 of 1%. Retail or beginning traders often trade currency in micro lots, because one pip in a micro lot represents only a 10 cents move in the price. This makes losses easier to manage if a trade doesn't produce the intended results. In a mini lot, one pip equals $1 and that same one pip in a standard lot equals $10. Some currencies move as much as 100 pips or more in a single trading session making the potential losses to the small investor much more manageable by trading in micro or mini lots. Far Less Products The majority of the volume in currency trading is confined to only 18 currency pairs compared to the thousands of stocks that are available in the global equity markets. Although there are other traded pairs outside of the 18, the eight currencies most often traded are the U. S. dollar (USD), Canadian dollar (CAD), euro (EUR), British pound (GBP), Swiss franc (CHF), New Zealand dollar (NZD), Australian dollar (AUD) and the Japanese yen (JPY). Although nobody would say that currency trading is easy, having far less trading options makes trade and portfolio management an easier task. What Moves Currency? An increasing amount of stock traders are taking interest in the currency markets because many of the forces that move the stock market also move the currency market.

One of the largest is supply and demand. When the world needs more dollars, the value of the dollar increases and when there are too many circulating, the price drops. Other factors like interest rates, new economic data from the largest countries and geopolitical tensions, are just a few of the events that may affect currency prices. The Bottom Line Much like anything in the investing market, learning about currency trading is easy but finding the winning trading strategies takes a lot of practice. Most forex brokers will allow you to open a free virtual account that allows you to trade with virtual money until you find strategies that work for you. Everybody is familiar with the term “trading”. Most of us have traded in our everyday life, although we may not even know that we have done so. Essentially, everything you buy in a store is trading money for the goods you want. At tradimo you will learn how to trade the financial markets online – but exactly what is online trading? This article will give you an understanding of how trading can be defined and how online trading works. The principles of trading. The term “trading” simply means “exchanging one item for another”. We usually understand this to be the exchanging of goods for money or in other words, simply buying something.

When we talk about trading in the financial markets, it is the same principle. Think about someone who trades shares. What they are actually doing is buying shares (or a small part) of a company. If the value of those shares increases, then they make money by selling them again at a higher price. This is trading. You buy something for one price and sell it again for another — hopefully at a higher price, thus making a profit and vice versa. But why would the value of the shares go up? The answer is simple: the value changes due to supply and demand – the more demand there is for something, the more people are willing to pay for it. Increase in demand means an increase in price. We can explain this using a simple everyday example of buying food. Let’s say you are in a market and there are only ten apples left on a stall. This is the only place where you can buy apples.

If you are the only person and you only want a couple of apples, then the market stall owner will most likely sell them to you at a reasonable price. Now let's say that fifteen people enter the market and they all want apples. To make sure that they will actually get them before the others do, they are willing to pay more for them. Hence, the market stall owner can put the price up, because he knows that there is more demand for the apples than supply of them. Once the apples reach a price at which the customers think they are too expensive, they will then stop buying them. When the market stall owner realises that he is not selling his apples anymore because they are too expensive, he will stop raising the price and it may come back down to a level, at which customers will start to buy the apples again. Increase in supply means a decrease in price. Let’s say that suddenly another market stall owner comes into the market and has even more apples to sell. The supply of apples has now increased dramatically.

It stands to reason that the second market stall owner may want to sell apples at a cheaper price than the first stall owner to entice customers. It also stands to reason that the customers would probably want to buy at the lower price. Seeing this, the first stall owner will most likely bring his prices down. The sudden increase in supply has therefore brought the price of the apples down. The price at which demand matches supply is called the “market price”, i. e. the price level at which both the market stall owner and the customers agree on both a price and number of apples sold. Application to the financial markets. The concept of supply and demand is the same in the financial world. If a company posted some great results and is paying very good dividends, then more people want to buy the shares of the company. This increased demand will lead to an increase of the price of those shares. What is online trading?

For a long time financial trading was purely conducted electronically between banks and financial institutions. This meant that trading in the financial markets was closed to anyone outside of these institutions. With the development of high speed Internet, anyone who wanted to become involved in trading was able to do so online. Almost anything can be traded online: stocks, currencies, commodities, physical goods and a whole host of other things – at this stage, you do not need to worry about all of these. For now, just keep in mind that if something can be traded, it will be traded. Out of all of these markets, the forex market is the largest. Almost $4 trillion worth of currency is traded every single day – this is bigger than any stock exchange anywhere in the world. US Search Mobile Web. Welcome to the Yahoo Search forum! We’d love to hear your ideas on how to improve Yahoo Search . The Yahoo product feedback forum now requires a valid Yahoo ID and password to participate. You are now required to sign-in using your Yahoo email account in order to provide us with feedback and to submit votes and comments to existing ideas. If you do not have a Yahoo ID or the password to your Yahoo ID, please sign-up for a new account.

If you have a valid Yahoo ID and password, follow these steps if you would like to remove your posts, comments, votes, andor profile from the Yahoo product feedback forum. What Is Forex Trading? 7 Things You Need To Know. Did you know that forex exchange market is the largest financial market in the world and it is many times larger than of stock market? It is no surprise that forex trading has taken off in Singapore over the past couple years. In this article we will share with you what forex trading is about. What is Forex Trading? As the business industry moves to being global, people and entities need negotiable tools to effectuate transactions. Currencies have different values in different countries. This dilemma is recognized by Bretton Woods and thus pushed for a system that allows a free flow of trading between nations after the World War during the United Nations Monetary and Financial Conference. The structure that we have at present was a result of this action. Hence, we have foreign exchange trading. There are two views on why forex trading is vital and considered the largest and liquid in the financial market. One, companies, the government, and even individuals earn or has acquired foreign currencies through buy and sell transactions. The second is the conversion of profits from foreign countries.

Thus, on a daily basis millions, billions and even trillion of money flow through the trade. If you haven't caught up with the picture just yet, forex trading, also known as foreign exchange trading or FX trading is a process by which currencies are sold and bought. Although it is referred to as an exchange, currencies are actually traded. Hence, there is physical office or ‘products’ being exchange. There is only a computer network that connects dealers, entities or institutions for the transaction. It is even available for 24 hours a day. #1 Who can participate in Forex Trading? Forex trading is open to anyone. When traveling to a foreign country and you exchange your currency to that of the foreign country is already participating in the forex trading. That simple transaction already allows you to be part of the market. However, there are other ways that you can join and participate. You can be a dealer or an investor.

Being a dealer will require you license as a broker or dealer to be able to enter the market. There are several brokers in Singapore that you can connect with when you want to be an investor. The investor in forex trading can be individuals, who are called the retail forex traders or large organizations, which are institutional traders. Institutional traders such as banks, hedge funds and investments managers make up the biggest participants in the forex trading. Banks serve as the facilitators of trading for their clients, while hedge funds and investment managers have pension accounts and the likes involve in the market. A portion of the player's pie consists of individual traders or the retail forex traders. They are relatively smaller compared to large institutions. But, more and more individuals are attracted to forex trading. #2 How Can I Make Money From It? Your aim in forex exchange trading is to buy currency with another currency in the hope that the currency you bought will increase in value than the currency you used to buy the former. As an investor, you can take the short or long position in the buy and sell process. The short position pertains to the selling of the currency. In this position, you will be selling the base currency with the quote currency. When the base currency falls in price, you will buy it back and get your earnings.

You can also have the long position . The long position will require you to sell the base and buy the quote currency. It is opposite the short position as you will now buy back the base currency when it increases in value and sells it. #3 What are the basics concepts? When visiting a foreign exchange (also money changer), you might have observed a list of paired currencies. This listing reflects the relationship or the equivalent value of one against the other. The first listing is called the base currency, and other is the quote currency. What happens here is that you use the quote currency to buy or purchase the base currency. In the forex trading, the widely traded pairing is the EURO-USD. But, in Singapore, there are a lot of pairings to cater to different currency trades. Pips — If you are new to the forex trading, one of the important terms and concepts you need to know and understand is the pip or pips or percentage in point. The pip in forex trading as defined by Investopedia is related to the currency value (from the previous point of discussion), which is the smallest unit measure when you trade the currencies. This unit of measure, is however, more than just to calculate. It can be a beneficial concept to integrate into to your trading strategies. The pip also represents the movement or change in the value of the paired currencies. You can observe the pip on the last decimal of the currency value.

An initial look at the pip seems like an insignificant change in value. However, forex traders know that this can affect investors because it can increase or decrease the value of quote currency when buying base currency. Some traders even have the concept of ‘pipettes’ for traders or dealers that used a different decimal system from the standard two or four decimals. A pip can also be powerful when incorporated into your planning and strategy because, despite the changes in the value, you can still earn or minimize loss as an investor. Thus, when talking to a dealer, you can also ask about the pip and determine how they managed it. Spread — Aside from the currency and pip pipette, the spread i is another concept that traders have to master. Simply put, a spread pertains to the relationship between the ask and bid principle in forex trading. The ask refers to the amount or price that the dealer is asking for the selling of the currency. Meanwhile, the bid is the amount or price that dealer is willing to bid for the currency that is being sold. #1 The fixed spread is the type of spread that has a fixed ask and bid price regardless of the market backdrop. The amount does not change and mostly done by automatic trading.

#2 There is also a fixed spread with extension , which is a spread having a part fixed, and a part that is set and the other part is dependent on market changes. #3 The variable spread is the opposite of the fixed spread, which changes as the market conditions also change. Through understanding the spread and its efficient use, whether it be fixed, with an extension or a variable one will lead to success. That is why having a trustworthy dealer and platform is very important for investors especially if they are new to the industry. #4 What is leveraged trading? Leveraged trading is one of the known strategies that investors can do to manipulate the forex trading in their favor. It is the when your dealer loans to you, the investor, money to increase your capital required, which the margin. Using a leverage is a win-win for the investor and broker if done right. It can help deal with fluctuations in the rate of exchange. In some way, leveraged trading can distribute the risk associated with the trading business although it is in the form of a load. An example of this is when your broker lends you an amount of money for your forex trading account, and you earn a certain percentage. Your own capital and that of the loaned money will also increase. Hence, you have the capital plus the loan money and then the profits based on the amount of your original money and that of the money that the broker has loaned to you. #5 What are the risks in forex trading?

Forex trading involves risks like all other financial investment activities. But, in forex trading, it is riskier because of the very dynamic conditions, where slight changes can also mean significant failures. One of the risks in forex trading is the interest risk . This risk is related to the interest rates of the exchange rates. The decrease in the interest rates means that the currency is also weak. Hence, the investors at a disadvantage when this happens. As mentioned, the market is very volatile that alterations may sometimes be expected. Another risk is one that investors may be exposed to when you operate with leveraged trading. The other side of the coin is when there is loss due to the changes in the market.

As an effect, there is a margin call, requiring the investors to add their capital, which means investing more money. The stability of the country’s forex trading structure can also play a big role in risk exposure in forex trading. A country with weak or poor structure can lead to a currency crisis that is a nightmare for investors. It will decrease the value of the currency and a deficit to the investors. There may be other risks involved in forex trading. When you talk to a dealer, make sure that you also cover risks. You need to understand how they can mitigate or handle the risks. #6 Who are the forex brokers? From the several points and concepts we have discussed, we also give emphasis to the broker or the dealer who or where investors entrust their financial investments. The relationship between you and your broker is crucial to ensure that you will succeed in the trading business. When trading in foreign exchange, an investor like you, have dealers or brokers to serve as the intermediary.

They can give you access to the platform where the currencies are traded. Hence, now you can buy and sell different currencies. Through the forex brokers and the advent of the Internet, small-scale investors or the individual investors can now participate in foreign exchange trading. The brokers or dealers will be your salesman and help you through the trading process. They can even lend you finances for your margin (leverage trading). Therefore, they can help you in many ways. The brokers can be compensated in different ways. They can have a transaction fee which may represent a percentage of your transaction. They can also earn through the spread or the ask and bid process through selling the currency slightly higher than the original purchase price. In Singapore, there are several brokers and dealers. In choosing your dealer, you need to keep in mind their legitimacy, reputation, and performance. You need to partner with a dealer that you are comfortable with their set-up and strategies.

#7 What characteristics should successful brokers and platforms have? The characteristics each dealer in forex trading are quite simple that what you might think. The one important thing they should provide knowledge of the basics, allow you to experience and always update your information, and you can understand the strategies used by the dealers and platforms. Provide knowledge — They say that knowledge is power. It is true and applicable in any endeavor but is one of the strongest foundation of forex trading success. You may start from this post, but you need to expand your knowledge of the basics and the ins and outs of the industry. One thing you can do is tap a dealer or broker who can transfer learning to you to enable you to start your trade. There are also platforms, where you can access the information that you need. You just have to cross-check to examine the validity and accuracy of the information you have gathered. Allows you to experience — Theoretical knowledge is a good way to start learning the forex trading business. It should be backed by relevant experiences. You can ask the dealer or broker to let you observe how the trading really works to give you a concrete understanding of the industry. If you cannot tap a broker or dealer, a forex trading platform also works. You just have to make sure that it offers a demo program for beginners or learners like you. There are platforms that let you experience through simulated trading with the use of fake or play money.

Through this approach, your knowledge of the industry will be applied and put into test. It can also help you design your own strategy when you get to the real thing. Provide reliable information — It is not enough to know fundamentals of forex trading because the business is very dynamic. The slight changes can influence your success. It is like reading your news to know what is happening around you. In forex trading, you also have to update your knowledge to keep up with the shifts. It is not enough to know fundamentals of forex trading because the business is very dynamic. The slight changes can influence your success. It is like reading your news to know what is happening around you. In forex trading, you also have to update your knowledge to keep up with the shifts. Information reliability also applies when choosing a dealer or platform. That is, when you choose to tap with a dealer or use a certain platform, make sure that they are legitimate and that they offer valuable, updated, reliable and relevant information to you.



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