The word “Forex” is a blend word, the result of combining the two words “foreign” and “exchange.” Trading Forex currencies online with purpose of making money call Forex Trading online.
What is Forex Trading
Forex is an investment opportunity whereby you can make money online by trading one or more foreign currencies for another at an agreed exchange price in the online over-the-counter (OTC) Forex trading market (Fx trading).
The Fx trading market is like any other market where goods are traded except that Fx involves only trading foreign currencies. Foreign currency exchange is the most traded market in the world, turning over an average of $5.3 trillion each and every day.
The FX trading market involves free-floating currencies (or those not supported by any specific material like silver or gold), which are treated like goods in the Fx trading market. You can buy Euro dollars by paying Australian dollars or you can buy the Japanese Yen by paying U.S. dollars, etc.
Profits and losses in the online Forex market are based on fluctuations in the values of different currencies, with the two most widely traded currencies being the U.S. dollar and the Euro (kings of currencies). The Japanese Yen, Canadian Dollar, Australian Dollar and New Zealand Dollar are also popular for currency exchanges.
Forex Trading Hours
Fx trading is conducted 24 hours a day, 5 days per week, from Monday through Friday. Bigger FX investors include large banks and international corporations, as well as the best FX trading Brokers, and they are online all the time for trading foreign currencies.
What Is Currency Trading Leverage
In Fx, traders use leveraging to profit from differences in exchange rates between two countries. Since Forex is a “leveraged” product, you are only required to make a deposit equal to a small percentage of the full value of the currency and the remainder is a “loan” (or leverage) provided to traders by the Fx broker who is handling their account(s). This translates to significantly higher profits (or losses) from initial capital spent than in traditional trading. The leverage that is attainable in the Fx market is one of the highest for investors.
In order to participate in the Fx market, a trader must first open a currency trading account with a broker. In order to trade $100,000 worth of currency with a margin of 1%, a trader only has to deposit $1,000 into his or her account. The amount of leverage provided is usually 1:50, 1:100 or 1:200 or more, depending on the broker and the amount the investor is trading.
You may think 100:1 leveraging seems extremely risky, but it’s significantly less considering that currency prices usually don’t change by more than 1% in daily trading. If currency values fluctuated as much as equities, brokers wouldn’t be able to provide as much leverage.
What is the currency pair in online Forex trading market
All the Currency Trading transactions occur in terms of currency pair, for example, the US dollar and the Euro. The transactions depend on the exchange rate so the exchange rate is the basic tool of the Forex transactions.
The exchange rate is expressed in the form of ratio. The ratio is the ratio of the values of both the currencies, for example, the exchange rate of Euro/USD is 1.4086. The ratio is same for the traders in every country but it does not stay constant every time. The ratio changes as the values of the currencies change.
The exchange rate changes frequently throughout any trading session and may be different in this minute from what it was in the last minute. So the traders willing to trade in any currency should be aware of the latest exchange rate.
The rightmost digit of the exchange rate is referred to as the “Pip”. It means if the exchange rate of the currency pair is 1.4086 and goes to 1.4087 then it has changed 1 pip . Pip is the smallest unit in the online currency trading.
Pip stands for Percentage in Points. Most of our currency pairs are quoted to 5 decimal places with the change from the 4th decimal place (0.0001) in price commonly referred to as a ‘pip’.
For example, if the price of the EUR/USD currency pair moved from 1.33800 to 1.33920, it is said to have climbed by 12 ‘pips’ (92-80=12).
What Is Spread In Fx Trading
The difference in the BID/ASK of the currency pairs is referred to as the ‘spread’. An example would be EUR/USD dealing at 1.33800/1.33808 (in this case the spread is 0.8 pips or 0.00008).
The exceptions to this are the JPY pairs which are quoted to just 2 decimal places. A USD/JPY price of 97.41/97.44 displays a 3 pip ‘spread’.
How to take make money in Foreign exchange market
Currency Trading market changes rapidly and this is the nature of this market. It means that the chances to make money exist every time in the market. The traders enjoy these opportunities if their broker is best and provides currency trading advices every time. A good currency trading broker suggests well developed mechanisms to control risk. The tips given at the right time can help the traders to earn profit in both rising and falling market by going long or short. A good broker is one that gives the valuable tips and advices in both the bullish and bearish market, ForexSQ traders says, Leverage is another factor that helps the traders to earn more in less time in Online Forex Trading market.
Leverage is the support given by the Foreign exchange trading broker to the traders to place and execute buying orders of much higher value as compared to their initial investment. Mostly foreign exchange brokers provide the leverage of 100:1 but some brokers also allow 400:1 leverage. Remember, you can trade with the 400:1 leverage if the broker allows you but you should not trade with 400:1 leverage even if the broker allows you because higher the leverage the greater will be the risk. It is the job of the Fx trading brokers to inform their clients that what leverage they can use to do currency trading and it is the job of the traders to follow the advice of their Forex trading Brokers and use low leverage.
Profit in the FX market can be made by buy or sell different currencies for example if you think the value of Euro increase against U.S Dollar you can buy Euro and make profit. You can buy or sell currencies many times in the same trading session but this can be possible only if you follow all of the tips and advices we tell you because our team is highly experienced in Currency Trading market . The experience comes after several years of hard work, calculations and practice.
Many people ask that whether the online Fx trading is risky or not. The answer is yes. The currency trading is risky if the trader plays like a gambler. This can be the most risky business if you trade without predictions and calculations and without following the useful advices . It means you can lose your complete investment within few minutes if you place orders blindly. On the other hand, this can be the most profitable online business if the trader trades like a thoughtful trader. So if you want to be successful in currency trading, then open your account with the best Forex broker and Trading Forex like a professional trader rather than playing like a gambler.