Online Forex Trading for Beginners
What is Forex Trading?
To know more about Forex trading we should understand the basic market. stand for foreign exchange forex is simultaneous buying of one currency and the selling of other currencies traded in pairs. The volume of forex market each day is very high, more than any other market in the world, and placed in major financial institutions around the world. Forex market is open 24 hours a day and 5 days a week. in this article i will share more about forex step by step so I say it “forex trading for dummies” let’s start to know some words that always seem in online forex trading.
Currencies in Forex market are always priced in pairs and all trades result in the simultaneous buying of one currency and selling the other. The point of currency trading is to buy the currency that increases in value on the one you sold. When you bought a currency and the price appreciates in value, you must sell the currency back to lock the profit.
In the forex trading, currencies quoted in pairs. The first price listed is known as the base currency and the second called the counter or quote currency. usually currencies quoted using five significant numbers, with the last placeholder called a point or a pip, but some brokers use six digits for quote. For example EUR/USD quote at 1.3778/1.3781. Just like the other financial products, forex quotes include “bid” and “ask” or “sell” and “buy” price. By quoting both ask and bid in real-time, brokers make sure that traders always receive a fair price on all trade. As in any traded instrument, there is a cost applied in establishing position. This cost may vary between the different brokers and sometimes it called “spread”. For example EUR/USD bid at 1.3778 and ask at 1.3781, these three pips spread defines the trader’s cost, which can be recovered with favourable currency move in the market.
The margin here is known as performance bond, or good deposit. This is very useful to avoid total loss of your account. Trade stations or trading terminal have margin management capabilities or as forex margin requirement calculator. When the fund in account fall below margin requirements, broker’s dealing desk will close all open positions. This is what we called “Margin Call”. This prevents client’s accounts from falling into negative balance, even in a high volatile and fast market. The NFA (National Futures Association) rule requires at least 1% margin at all time to support an open trade.(Noe this may change at any time) Some trading terminal automatically calculate margin requirement according the formula.
Next Lesson: Forex MarketNone found.