Basics Of Forex

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What is Forex Trading?

  • Forex trading is the process of speculating on currency prices to potentially make a profit. Currencies are traded in pairs, so by exchanging one currency for another, a trader is speculating on whether one currency will rise or fall in value against the other.
  • The value of a currency pair is influenced by trade flows, economic, political and geopolitical events which affect the supply and demand of forex. This creates daily volatility that may offer a forex trader new opportunities.Through online trading platforms provided by global brokers, you can buy and sell currencies from your phone, laptop, tablet or PC.
What is Online Forex Broker

  • An online forex broker acts as an intermediary, enabling retail traders to access online trading platforms to speculate on currencies and their price movements.
  • Most online brokers will offer leverage to individual traders, which allows them to control a large forex position with a small deposit. It is important to remember that profits and losses are magnified when trading with leverage.
  • Most Brokers offers a number of different trading accounts, each providing services and features tailored to a clients’ individual trading objectives.
  • Discover the account that’s right for you. If you’re new to forex, you can begin exploring the markets by trading on DEMO ACCOUNTS risk-free. 
What is Leverage, Pip & Spread �
Leverage
  • Leverage, which represents a margin trading ratio, enables traders to borrow a certain amount of money that allows them to trade in much bigger deals. Moreover, leverage allows one to trade using more money than they have in their account. Therefore, you “leverage” your account’s balance to place a bigger trade. Currency rates move very slowly. This makes small trades unfashionable as they only return small profits and losses for every pip rate changes. Therefore, leveraging helps one to trade in larger deals hence amplifying their potential profits and losses.

  • In other words, Leverage is using something small to help achieve something big. In the context of finance, leverage means borrowing money to invest in a business or asset, with the aim of increasing potential profits. However, leverage also comes with greater risk, as losses can be magnified just as easily as gains.
Pip

  • Price Interest Point represents the smallest change in a currency pair. Typically, it is the fourth decimal point, although many brokers quote using the fifth decimal. However, the fifth decimal doesn't really affect the price as it changes really quick. Currency pairs that include the U.S. dollar, a pip is 1/10, 000 of a dollar, whereas when the currency pair includes the yen, a pip is 1/100 of a yen because the yen is closer in value to 1/100 of other major currencies.

Spread
  •  In Forex trading, brokers quote the bid and ask price for the currency pairs. The bid is the price that a trader can sell the base currency while the ask is the price they can buy the base currency. Spread refers to the difference between the two prices. Besides, this is how the “no commission” brokers- those who do not charge a separate fee on traders’ transaction- make their money. The spread is measured in pips. Most currency pairs- the base currency and quote currency- have a pip value equal to 0.0001. For instance, take the following quote; EUR/USD = 1.1051/1.1053 the spread is 0.0002, which equates to 2 pips.


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