It is fair to say that Forex is the most important financial market available today, having a daily turnover of more than $4 trillion. Some of you might also know it by the name of foreign exchange.
Forex represents an ability to buy or sell world currencies in exchange for another one. This is eventually creating such massive market in the world, so it is not surprising to see so many people trying to be good at it.
For example, the total sum of money traded here daily is much bigger than the whole GDP of many countries.
It is also worth mentioning that foreign exchange is one of the most liquid markets on the planet. The trick behind this is in business hours. It doesn’t matter if it is day or night, Monday or Sunday, the markets are going to be active which means you can trade at any time you want! There are no restrictions. The main difference from the stock market (besides the one mentioned above) is that trades in forex are taking place between persons holding currencies, not through the exchanges. Of course, there are peak hours when most of the forex traders are online.
All beginners who are interested to try it out should learn a couple of basic things before opening an account. The first and the key one is currency pairs – the most important component of the whole market.
The value of one particular currency in comparison to others is measured by a currency pair price movement.
The general division of currency pairs nowadays is to majors, minors, and exotics. The number of potential currency pairs on the market is unlimited, but of course, there are the most common ones, usually coming from the top five or six world’s economies (the majors). The minors don’t have any pair that includes currencies coming from tier one.
Some of the most popular exotic pairs nowadays are the Hong Kong Dollar, the Chinese Yuan, Russian Rubble and so on. We recommend rookies to forex trading stick to the majors. ‘Lots of betting sites are now offering also financial betting as trading on currencies is of interest of many punters out there’ said Ethan Rowe from leading UK site BestBettingSites.Online. ‘After all this is not surprising as after all there is just a fine line between trading and gambling’, added Rowe.
How The Trading Actually Works – Place Bids, Ask For Prices
All foreign currency trading platforms are offering two basic options – Bid and Ask Prices. A bid is where participants simply indicate their price to buy a specific currency. The prices are changing a hundred times per day, which is making this whole process even more interesting. The movements are of course caused by the demand and supply in the market.
The Ask Price is a feature used to let others know about the price one is likely to sell a specific currency pair. Like the Bid feature we mentioned above, there are many fluctuations included in the Ask Price as well! The main idea of making a profit here is buying a currency when it goes low or hopefully reaches the bottom, and then re-selling it for a much higher price when it gets up on the feet.
Some of the most common Forex trading terms you need to know about
If you get into a group or forum of people who are already experts at Forex trading or at least have a couple of months of experience, you might run into some terms never heard before. Some we are going to mention below could be of crucial importance for long term success, so make sure to understand them fully before trading anything.
A Pip is the first one and it refers to a changed value between two foreign currencies. Let’s say EUR/USD pair moves at price from $1.02 to $1.03. The difference between these two numbers, $0.01 is representing one Pip.
Second, we would like to mention here is a Spread. Spread is the difference presented between the buying and the selling price in Forex trading. Let’s take a look at another example. The Bid price for EUR/USD is 1.11 and the Ask Price is 1.12. The spread, in this case, would be 0.01 or one Pip. However, the price of this specific currency pair will have to be over the spread for a trade-to become profitable. The main advice here is to look for a smaller spread as possible – it may make it easier to make a profit on small price fluctuations. Many experts act rapidly when they see thin spreads. It’s a sign of an urgent trade.
The third on our list of terms is Margin. This one shows the amount of money in Forex account that allows the trader to do trades of certain sizes. It serves as collateral for trading. There were many misinterpretations of margins lately by the rookies – it is not any sort of a fee or cost for trading.
How To Get Started
The first thing you need to do before making the first trade is to open a Forex Brokerage Account. There are so many brokers available nowadays, and a big majority of them have an amazing welcome offer for new traders. Set it up, complete the registration, fund the account, pick a strategy and you are ready to go! We always encourage our readers to start building bankroll slowly, which means lower deposits and lower risks. Time is of the essence when it comes to being good at forex, as well as the experience.
Forex trading has many advantages in comparison to the stock market or similar activities. As already mentioned, their market is open 24 hours a day, seven days a week. It doesn’t matter where you are. If there is an internet connection, you can trade without any issues. Some of the other advantages we would like to mention as well are high liquidity, very low transaction costs (no clearing fees, exchange fees or legal taxes), leverage and absence of middlemen.
