TradeVinder

More About Forex

More About Forex

Why traders need a financial consultant or trading consultant? The answer is very easy.

Forex Market is huge. So it’s very difficult to keep an eye on all the factors that are going to affect this market. There is a need to track all the global events and news.

If someone asks what is traded in Forex? In such a case the answer is very MONEY. Because no one is buying or selling anything in physical form.

Every currency symbol contains 3 letters. In this first two letters says the name of the country and third says the name of the currency of that country. In the fx, There are some currencies that are  considered as major currencies. These are as follows-

  1. Great Britain pound (GBP)

  2. European Euro (EUR)

  3. Japanese Yen (JPY)

  4. Australian Dollar (AUD)

  5. Swiss Franc (CHF)

  6. United States Dollar (USD)

  7. New Zealand Dollar (NZD)

The above currencies are known as major currencies because these are the most widely and heavily traded currencies. Currencies are always traded in pairs. In other words, currencies are quoted in relation to another currency. Such as GBP/USD.

GBP/USD=1.22323, Here GBP is the base currency and USD is Quote currency.

There are total 3 types of pairs of currencies-

  1. The Major– The currency pair including US Dollar is Major pair.
  2. The crosses– In such pairs US dollar is not included.
  3.  The Exotics– Exotic pairs include one major currency and one from the emerging markets.

For trading in Forex, there is no central location. If a person has internet connection then trading can be done from anywhere.

Fun Fact- the US Dollar is the most traded currency; it makes almost 85% of all transactions. On the second number, there is Euro.

How you earn in FOREX?

Suppose you purchased 10000 euros at EUR/USD at an exchange rate of 1.1500. After two weeks, its price is 1.2000 So all you earned is 500$.(10000*1.1500= 11500, 10000*1.20= 12000 so      12000-11500=500$)4

Here this means that for 1 EUR = 1.1500 USD

An exchange rate is the ratio of one currency value against another currency. The exchange rate tells you how much a trader has to pay in units of the quote currency to buy one unit of the base currency.  So in the above example to buy 1 EUR, a trader will have to buy 1.1500 USD.

Some Terminologies-

  1. Long – if a position is in buy then it is known as Long position.
  2. Short– if a position is in sell then it is known as Short position.
  3. Bid– Price at which the broker buys the base currency in exchange for quote currency.In other words, it is the selling price for the trader.
  4. Ask– Price at which the broker sells the base currency in exchange for quote currency. In other words, it is the buying price for the trader. This is also known as the offer price.
  5. Spread– Difference between Bid and Ask.
  6. Pip– Last decimal place of a price quote.
  7. Lot–  Number of currencies a trader will buy or sell. Following are the lot size available-
LotNo of units
Standard100,000
Mini10,000
Micro1,000
Nano100

In a standard lot profit of 1 pip = 10$

8. Leverage– in Forex, when a trader wants to trade more than capital then he can do it borrowing money from the broker in a ratio of capital. This is known as leverage. It can vary from 2:1 to 500:1 depending on the broker