Forex for a trader
Whats forex

Whats forexForex 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 (FX) is the market in which currencies are traded. The forex market is the largest, most liquid market in the world, with average traded values that can be trillions of dollars per day. It includes all of the currencies in the world. Real-Time Forex Trading. BREAKING DOWN 'Forex - FX' There is no central marketplace for currency exchange; trade is conducted over the counter. The forex market is open 24 hours a day, five days a week, except for holidays, and currencies are traded worldwide. The forex is the largest market in the world in terms of the total cash value traded, and any person, firm or country may participate in this market. The term foreign exchange is usually abbreviated as "forex" and occasionally as "FX." The global foreign exchange market is the largest and the most liquid financial market in the world, with average daily volumes in the trillions of dollars. Forex transactions take place on either a spot or a forward basis. There is no centralized market for forex transactions, which are executed over the counter and around the clock. The largest foreign exchange markets are located in major financial centers like London, New York, Singapore, Tokyo, Frankfurt, Hong Kong and Sydney. Just How Large Is the Forex Market?

The forex market is unique for several reasons, mainly because of its size. Trading volume is generally very large. As an example, trading in foreign exchange markets averaged $5.1 trillion per day in April 2016, according to the Bank for International Settlements, which is owned by 60 central banks, and is used to work in monetary and financial responsibility. The world's largest trading centers can be found in London, New York, Singapore and Tokyo. How to Trade in the Forex Market. The market is open 24 hours a day, five days a week across major financial centers across the globe. This means that you can buy or sell currencies at any time during the day. The foreign exchange market isn't exactly a one-stop shop. There are a whole variety of different avenues that an investor can go through in order to execute forex trades. You can go through different dealers or through different financial centers, which use a host of electronic networks. From a historic standpoint, foreign exchange was once a concept for governments, large companies and hedge funds. But in today's world, trading currencies is as easy as a click of a mouse — accessibility is not an issue, which means anyone can do it. In fact, many investment firms offer the chance for individuals to open accounts and to trade currencies however and whenever they choose. When trading in the forex market, you're buying or selling the currency of a particular country. But there's no physical exchange of money from one party to another.

That's what happens at a foreign exchange kiosk — think of a tourist visiting Times Square in New York City from Japan. He may be converting his (physical) yen to actual U. S. dollar cash (and may be charged a commission fee to do so) so he can spend his money while he's traveling. But in the world of electronic markets, traders are usually taking a position in a specific currency, with the hope that there will be some upward movement and strength in the currency they're buying (or weakness if they're selling) so they can make a profit. A spot deal is for immediate delivery, which is defined as two business days for most currency pairs. The major exception is the purchase or sale of U. S. dollars vs. Canadian dollars, which is settled in one business day. The business day calculation excludes Saturdays, Sundays and legal holidays in either currency of the traded pair. During the Christmas and Easter season, some spot trades can take as long as six days to settle. Funds are exchanged on the settlement date, not the transaction date. The U. S. dollar is the most actively traded currency. The euro is the most actively traded counter currency, followed by the Japanese yen, British pound and Swiss franc. Market moves are driven by a combination of speculation, especially in the short term; economic strength and growth; and interest rate differentials. Forward Transactions. Any forex transaction that settles for a date later than spot is considered a "forward." The price is calculated by adjusting the spot rate to account for the difference in interest rates between the two currencies.

The amount of the adjustment is called "forward points." The forward points reflect only the interest rate differential between two markets. They are not a forecast of how the spot market will trade at a date in the future. A forward is a tailor-made contract: it can be for any amount of money and can settle on any date that's not a weekend or holiday. Transactions with maturities longer than a year are relatively unusual, but are possible. As in a spot transaction, funds are exchanged on the settlement date. A "future" is similar to a forward in that it's for a date longer than spot, and the price has the same basis. Unlike a forward, it's traded on an exchange, and can only be executed for specified amounts and dates. With a futures contract, the buyer pays a portion of the value of the contract up front. That value is marked-to-market daily, and the buyer either pays or receives money based on the change in value.

Futures are most commonly used by speculators, and the contracts are usually closed out before maturity. Differences Between Forex and Other Markets. There are some major differences between the forex and other markets: Fewer rules : This means investors aren't held to as strict standards or regulations as those in the stock, futures or options markets. There are no clearing houses and no central bodies that oversee the forex market. Fees and commissions : Since trades don't take place on a traditional exchange, you won't find the same fees or commissions that you would on another market. Full access : There's no cut-off as to when you can and cannot trade. Because the market is open 24 hours a day, you can trade at any time of day. Ease : Because it's such a liquid market, you can get in and out whenever you want and you can buy as much currency as you can afford. FOREX — the foreign exchange market or currency market or Forex is the market where one currency is traded for another. It is one of the largest markets in the world. Some of the participants in this market are simply seeking to exchange a foreign currency for their own, like multinational corporations which must pay wages and other expenses in different nations than they sell products in. However, a large part of the market is made up of currency traders, who speculate on movements in exchange rates, much like others would speculate on movements of stock prices. Currency traders try to take advantage of even small fluctuations in exchange rates.

In the foreign exchange market there is little or no 'inside information'. Exchange rate fluctuations are usually caused by actual monetary flows as well as anticipations on global macroeconomic conditions. Significant news is released publicly so, at least in theory, everyone in the world receives the same news at the same time. Currencies are traded against one another. Each pair of currencies thus constitutes an individual product and is traditionally noted XXXYYY, where YYY is the ISO 4217 international three-letter code of the currency into which the price of one unit of XXX currency is expressed. For instance, EURUSD is the price of the euro expressed in US dollars, as in 1 euro = 1.2045 dollar. Unlike stocks and futures exchange, foreign exchange is indeed an interbank, over-the-counter (OTC) market which means there is no single universal exchange for specific currency pair. The foreign exchange market operates 24 hours per day throughout the week between individuals with Forex brokers, brokers with banks, and banks with banks. If the European session is ended the Asian session or US session will start, so all world currencies can be continually in trade. Traders can react to news when it breaks, rather than waiting for the market to open, as is the case with most other markets. Average daily international foreign exchange trading volume was $5.1 trillion in April 2016 according to the BIS triennial report. Like any market there is a bidoffer spread (difference between buying price and selling price). On major currency crosses, the difference between the price at which a market maker will sell ("ask", or "offer") to a wholesale customer and the price at which the same market-maker will buy ("bid") from the same wholesale customer is minimal, usually only 1 or 2 pips. In the EURUSD price of 1.4238 a pip would be the '8' at the end. So the bidask quote of EURUSD might be 1.42381.4239. This, of course, does not apply to retail customers.

Most individual currency speculators will trade using a broker which will typically have a spread marked up to say 3-20 pips (so in our example 1.42371.4239 or 1.4231.425). The broker will give their clients often huge amounts of margin, thereby facilitating clients spending more money on the bidask spread. The brokers are not regulated by the U. S. Securities and Exchange Commission (since they do not sell securities), so they are not bound by the same margin limits as stock brokerages. They do not typically charge margin interest, however since currency trades must be settled in 2 days, they will "resettle" open positions (again collecting the bidask spread). Individual currency speculators can work during the day and trade in the evenings, taking advantage of the market's 24 hours long trading session. If you want to know more about how to start trading in Forex, please proceed to our free Forex course article. 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. 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. The foreign exchange market – also known as forex or the FX market – is the world’s most traded market, with turnover of $5.1 trillion per day.* To put this into perspective, the U. S. stock market trades around $257 billion a day; quite a large sum, but only a fraction of what forex trades. Forex is traded 24 hours a day, 5 days a week across by banks, institutions and individual traders worldwide.

Unlike other financial markets, there is no centralized marketplace for forex, currencies trade over the counter in whatever market is open at that time. How FX Trading works. Trading forex involves the buying of one currency and simultaneous selling of another. In forex, traders attempt to profit by buying and selling currencies by actively speculating on the direction currencies are likely to take in the future. What is forex? Quite simply, it’s the global market that allows the exchange of one currency for another. If you’ve ever traveled to another country, you usually had to find a currency exchange booth at the airport, and then exchange the money you have in your wallet into the currency of the country you are visiting. You go up to the counter and notice a screen displaying different exchange rates for different currencies. You find “Japanese yen” and think to yourself, “WOW! My one dollar is worth 100 yen?! And I have ten dollars! I’m going to be rich. ” When you do this, you’ve essentially participated in the forex market! You’ve exchanged one currency for another. Or in forex trading terms, assuming you’re an American visiting Japan, you’ve sold dollars and bought yen. Before you fly back home, you stop by the currency exchange booth to exchange the yen that you miraculously have left over (Tokyo is expensive!) and notice the exchange rates have changed.

It’s these changes in the exchanges rates that allow you to make money in the foreign exchange market. The foreign exchange market , which is usually known as “ forex ” or “ FX ,” is the largest financial market in the world. Compared to the “measly” $22.4 billion per day volume of the New York Stock Exchange (NYSE), the foreign exchange market looks absolutely ginormous with its $5 TRILLION a day trade volume. That’s trillion with a “t”. Let’s take a moment to put this into perspective using monsters… The largest stock market in the world, the New York Stock Exchange (NYSE) , trades a volume of about $22.4 billion each day. If we used a monster to represent the NYSE, it would look like this… Looks intimidating. Some may even find it sexy. You hear about the NYSE in the news every day… on CNBC… on Bloomberg…on BBC… heck, you even probably hear about it at your local gym. “The NYSE is up today, blah, blah”. When people talk about the “market”, they usually mean the stock market. So the NYSE sounds big, it’s loud and likes to make a lot of noise.

But if you actually compare it to the forex market , it would look like this… Oooh, the NYSE looks so puny compared to the forex market! It doesn’t stand a chance! Check out the graph of the average daily trading volume for the forex market, New York Stock Exchange, Tokyo Stock Exchange, and London Stock Exchange: The currency market is over 200 times BIGGER! It is HUGE! But hold your horses, there’s a catch! That huge $5 trillion number covers the entire global foreign exchange market, BUT retail traders (that’s us) trade the spot market and that’s about $1.8 trillion . So you see, the forex market is definitely huge, but not as huge as the others would like you to believe. We don’t like to exaggerate. We just keepin’ it real.

Do you feel like you already know what the forex market is all about? We’re just getting started! In the next section, we’ll reveal WHAT exactly is traded in the forex market. What is Forex Market. “Forex Market is a decentralized global market where all the world's currencies are traded against each other, and traders make a profit or loss from the currencies’ value changes.” Forex Market is also known as Foreign Exchange Market, FX or Currency Trading Market. History of Forex Market. The history of Forex market is marked by two particular events which put a deep stamp on its formation and development. These two historical events are the creation of Gold Standard System and Bretton Woods System. Gold Standard and Bretton Woods Systems. Gold Standard System was formed in 1875. The main idea behind it was that governments guaranteed that a currency would be backed by gold. All the major economic countries defined an amount of currency to an ounce of gold as the value of their currencies in terms of gold and the ratios for these amounts became the exchange rates for these currencies. This marked the first standardized means of currency exchange in history. However, World War I caused a breakdown of the gold standard system as countries sought to pursue economic policies which would not be constrained by the fixed exchange rate system of the Gold Standard.

In July 1944 more than 700 representatives from the Allied nations brought forward the importance of a monetary system which would fill the gap left behind the gold standard. They arranged a meeting at Bretton Woods, New Hampshire, to set up a system that would be called the Bretton Woods system of international monetary management. The creation of Bretton Woods System led to the formation of fixed exchange rates as the United States defined the value of US dollar in terms of gold equal to $ 35 for one ounce and other countries pegged their currencies to the dollar. The US dollar became the main reserve currency and the only currency that was backed by gold. However, in 1970 the U. S. gold reserves were so depleted that it was impossible for the U. S. treasury to cover all the reserves held by foreign central banks. In August 1971 the U. S. announced it would no longer exchange gold for the U. S. dollars that foreign central banks had in reserve. This was the end of Bretton Woods System and the beginning of Forex Trading System. Foreign Exchange Market. The forex market is the largest market in the world with an average trading value over $5 trillion per day. It has no centralized marketplace where transactions are conducted. Forex trading is carried out electronically over-the-counter (OTC), meaning that all trading transactions are performed via computer by traders and other market participants over the world. With no centralized location of trades, the forex market is open 24 hours a day, five and a half days a week, and currencies are traded worldwide across almost every time zone. The Forex Market is the most liquid market and its high liquidity means that prices can change rapidly in response to news and short-term events, creating multiple trading opportunities. To get more idea about it, let’s take a closer look at forex market history. How to Trade on Forex Market. The trade that takes place in Foreign exchange market involves simultaneously the buying of one currency and the selling of another.

This is because the value of one currency is relative to the other currency and is determined by their comparison. From a retail trader’s perspective Forex trading is the speculation on the value of one currency relative to another. Each currency pair can be thought of a single unit consisting of a “base currency” (the first currency) and a “counter (or quoted) currency” (the second currency) which can be bought or sold. It shows how much of the counter currency is needed to buy one unit of the base currency. So, in the EURUSD currency pair EUR is the base currency and USD is the counter currency. If you expect the price of Euro to increase against the price of the U. S. dollar you can buy the EURUSD currency pair. While buying a currency pair (going long) the base currency (EUR) is being bought, whereas the counter currency (USD) is being sold. Thus, you buy the EURUSD currency pair at a lower price to later sell it at a higher price and as a result make a profit. If you expect the opposite situation, you can sell the currency pair (go short), meaning sell Euro and buy the U. S. dollar. However, the risk is always there. If you buy Euro against the U. S. dollar, expecting that Euro is going to rise in price, but instead the U. S. dollar strengthens, you will then suffer losses.

So, besides the benefit that you can make from trading, you should always consider the risk involved in it. As you could see the foreign exchange market is not so complex to understand and not so dangerous to enter. You can become one of its participants in a few minutes and start earning money more than easily. How to learn Forex trading and specifically how to use the online trading platform are thoroughly presented on our website. You can read our educational materials and trading e-books which will help you understand the essence of Forex trading, discover its benefits, learn how to trade effectively and how to manage your risk. The foreign exchange market is extremely active all day long with price quotes constantly changing. It is the only market that truly operates 24 hours a day and five days a week. Currencies are traded in the largest stock exchanges and marketplaces all over the world: in Zurich, Hong Kong, New York, Tokyo, Frankfurt, London, Sydney and Paris. This means that across almost every time zone the market is active - when the market closes in the U. S. the trading day starts in Tokyo and Hong Kong. The time flexibility is very convenient for traders who have a busy working schedule. They do not need to worry about market opening and closing hours and are free to arrange their trade anytime they want. The chart below provides the working hours of major marketplaces. 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. Start trading on the most vibrant financial market – Forex with AvaTrade today! What is Foreign Exchange? Foreign exchange, more commonly known as Forex or FX, relates to buying and selling currencies with the purpose of making profit off the changes in their value.

As the biggest market in the world by far, larger than the stock market or any other, there is high liquidity in the forex market. Therefore, the forex market attracts many traders, beginners and experienced alike. With approximately $4 trillion USD traded in the market every day, the forex market has the highest liquidity in the world. Basically, this means that one can buy almost any currency he wishes in high volumes while the market is open. The forex market is open 24 hours, 5 days a week – Monday to Friday. Trading begins with the opening of the market in Australia, Asia, Europe to follow and then the USA until the markets close. The forex market start time during the summer is on Sunday at 9:00pm GMT, and ends at 9:00pm GMT on Friday. In the winter it’s 10:00pm-10:00pm accordingly. That results with currencies being traded at all times, day or night. Unlike some other instruments, where a downfall of the market would leave traders with untradeable assets, the forex market can always find a buyer or a seller. There are hundreds of currencies in the world, and each has a three letter symbol. American Dollars are USD, Euros are EUR, Swiss Francs are CHF, British Pounds are GBP and onwards to all the currencies. Currencies are divided into two main sorts – Major currencies and minor ones.

The major currencies are derived from the most powerful economies around the globe – the US, Japan, the UK, the Euro Zone, Canada, Australia, Switzerland and New Zealand. Together with the other currencies they create forex pairs. When going to a store to buy groceries, we need to exchange one valuable asset for another – money for milk, for example. The same goes for trading forex – we buy or sell one currency for the other. The currencies in the pairs are referred to as one against another. There are three types of forex pairs; Major pairs, Minor pairs and Exotic pairs. The major pairs always involve the USD, and are the most traded ones. The seven major pairs are EURUSD, USDJPY, GBPUSD, USDCAD, USDCHF, AUDUSD and NZDUSD. In the minor pairs the major currencies are traded between each other, excluding the USD. These can be EURGBP, CHFJPY and others.

The exotic pairs have one major currency and one minor, such as EURTRY, USDNOK and many more. Forex Trading Basic Terms. The most popular pair traded is the Euro vs. the American Dollar, or EURUSD. The currency on the left is called the base currency , and is the one we wish to buy or sell; the one on the right is the secondary currency , and is the one we use to make the transaction. Each pair has two prices – the price for selling the base currency ( bid ) and a price for buying it ( ask ). The difference between them is called a spread , and represents the amount brokers charge to open the position. The more a currency is traded, i. e. high volatility , its spreads will be narrower. The rarer the pair is, the wider the spreads will be. Usually a quote will be presented with four numbers after the dot, for instance 1.2356. In the case of EURUSD it means for every Euro the trader wishes to buy he will have to invest 1.2356 US dollars. Any change in the currency value will usually be seen on the fourth figure after the dot, mainly known as a pip . The spreads, gains and losses will usually be presented in pips. Some other terms of the online forex trading world are Going long and Going short , which stand respectively for ‘buying’ and ‘selling’. A trader who speculates the market will rise is called a ‘ Bullish Trader ’, while on the other side stands the ‘ Bearish Trader ’, who is more on the defensive side. In accordance, the terms ‘ Bull Market ’ and ‘ Bear Market ’ are used to describe the way the market goes. A bull market is on the rise, and a bear market is usually decreasing.

Experienced traders will decide their strategy depending on the market trends, and will make sure to follow all relevant events so they can precede the changes in the market and gain profit. In the past, every trader called his broker and instructed him on actions to be made. Today the trades are done directly by the client on a software, called a trading platform. Many of the platforms are available for computer, internet and mobile. Every trader has his own strategy, and he should find the platform that will enable him to perform it in the best way possible, i. e. that he will feel most comfortable in. Start trading on the most vibrant financial market – Forex with AvaTrade today! Leveraged trading, or trading on the margin, allows the trader to open larger positions than his own fortune would otherwise allow him. In most forex pairs, the maximum leverage that can be employed is 400:1; meaning that for every $400 of worth in the position, the trader will need to invest $1 out of his account. Therefore, if he wishes to buy 10,000 units of EURUSD in the price of 1.2356, instead of paying $12,356 he will pay only $30.89, which is 0.25% of the price, or a 400:1 ratio. It is important to remember that the profits and losses are determined by the position size, and as leverage trading can magnify profits also losses can be enhanced. What affects the Forex Market? The forex market has high liquidity, due to an elevated supply and demand rate. Traders apply transactions based on financial events, as well as general events. Naturally, when a currency will be on a high demand, its value will raise comparing to the other currencies, and vice versa.

Financial events are frequent statements by countries, central banks or other financial institutions, on topics such as unemployment rate, manufacture numbers and many more. A decrease in a country’s unemployment rate can indicate that the economy is strong, and this can lead to an increase of the local currency. If it’s a major one it will affect other currencies as well. Before the event takes place traders speculate on its content, and based on these speculations open positions. All the events can be seen and followed on the economic calendar. Going back to the popular trading pair – the EURUSD. Once logged into the platform the trader will check the ask and bid prices; for the purpose of the example they will be 1.2356 (ask), and 1.2359 (bid). The difference, as noted, is of 3 pips and this will go to the broker. If the trader believes the Euro will go up he will enter a ‘buy’ command. Then he will be required to select an amount – say 10,000 units.

The price for that is $12,356, and using leverage it comes to $30.89. If the market responded the way the trader predicted and the Euro rose from 1.2356 to 1.2360 – 4 pips, the trader would have made a profit from this trade. Why Trade Forex with AvaTrade? When trading forex, as well as any other instrument, you must be able to trade with confidence. Profits can never be guaranteed, and any type of trading has its advantages and disadvantages, as well as the risk of losing funds. At AvaTrade we are committed to a set of values which define our relationship with our customers. As such, we provide the best trading experience possible, offering top notch 245 multilingual customer service and the most advanced and user-friendly trading platforms. You can also use our teaching materials in the education tab on out site. You will find there a wide collection of articles, video tutorials and many more tools that will assist you in every step of the way. We know trading might be a bit overwhelming and even scary at times, but we do all we can to make sure you are fully prepared to begin trading in the real world. These tools and many others allow you to trade peacefully and know that AvaTrade has your back. Everything we provide is on the highest possible level, and we go to great measures to constantly innovate and improve them for you. Join AvaTrade today and enjoy the best trading experience you can get!



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