WHAT IS FOREX TRADING


LET'S TALK FOREX

The Foreign Exchange Market which is more widely referred to as the Forex Market is the most traded market in the world. There is over $ 3.2 Trillion worth of currencies traded worldwide every single day. The three key players in this market are the Banks, Institutions and Individual Investors. The Forex trading week kicks-off on Monday morning at 7 am in Australia and it follows the sun westward as the world's major financial capitals open and close from Tokyo to London and finally New York where trading ends for the week on Friday at 5pm EST. That means that Forex market operates 24 hours five days a week. There is no centralized marketplace for Forex rather currencies are traded over the counter (OTC) in whatever market is open at the time. This is in contrast to some other major markets that you may know such as Stocks, Bonds, Options and more. Every single day there is new economic reports and data that affect the value of individual currencies and cause fluctuations. Forex traders attempt to take advantage of fluctuations in the currency markets by buying or selling individual currencies to speculate on the future value of one currency versus the other. An excellent way to familiarize yourself with currency trading is to experience it first hand with the MT4Invest Practice account. See how the currency prices fluctuate at all times of the day and how they react during important economic data releases.

GET TO KNOW

QUOTATION SYSTEM

In the Forex market currencies are always quoted in pairs, for example EUR/USD or USD/CAD. The first quoted currency is called the base currency and the second is called the counter currency. So back to our example of the EUR/USD pair, then EUR is the base currency and the USD is the counter currency.

BUYING/SELLING

When you are buying/selling a currency pair then you are effectively buying the one currency while selling the other. For example, if you BUY GBP/USD then you have bought British sterling and simultaneously sold U.S Dollars. You would enter such a position if you expected the British Sterling to appreciate against the U.S Dollar. Alternatively, if you SELL GBP/USD then you are selling British Sterling and buying U.S Dollars in the expectation that the GBP will depreciate against the USD.

PIP

This is the smallest possible movement either up or down of the currency pair. In the EUR/USD pair a movement of 0.0001 is called a pip, in other words it is the fourth decimal place. A movement of 0.0002 of the EUR/USD pair is considered a 2 pip movement. However for all cases where the Japanese Yen is the counter currency, such as the USD/JPY, then a 0.01 movement of this pair called a pip. So there are only 2 decimal places in this case.

MARGIN/LEVERAGE

In the Forex market you are able to open and hold market positions that are significantly larger than your account value. The leverage on a standard MT4Invest account is 1:200, which means that with an account value of $1000 you can open positions up too $200000. However we do not recommend using a very high leverage during your trading as it can exaggerate your profits/ losses. The term margin refers to the minimum account value that you need in order to hold the position, in this case the Margin is ½%, which means that to open a trade of 1 Lot EUR/USD you will need to have at least $500 account value.