Forex Trading

What is Forex Trading?

Forex trading, at its simplest, refers to the exchange of currencies that occurs while travelling abroad. Traders buy one currency and sell another, while the exchange rate constantly changes according to supply and demand. The Foreign Exchange market is a global marketplace where currencies are traded24 hours a day Monday to Friday.

In contrast to the trading of stocks, forex trading occurs over the counter (OTC), so there’s no physical exchange. Almost all trading activity occurs among institutional traders, like bank employees, fund managers or multinational corporations. Most of these do not necessarily care about possessing the currencies themselves, but rather prefer to speculate or hedge against future exchange rate fluctuations. For instance, traders might buy US dollars and sells euros, if they think the dollar will strengthen in value. Consequently, they will be able to buy more euros in the future.

Forex trading, at its simplest, refers to the exchange of currencies that occurs while travelling abroad. Traders buy one currency and sell another, while the exchange rate constantly changes according to supply and demand. The Foreign Exchange market is a global marketplace where currencies are traded24 hours a day Monday to Friday.

In contrast to the trading of stocks, forex trading occurs over the counter (OTC), so there’s no physical exchange. Almost all trading activity occurs among institutional traders, like bank employees, fund managers or multinational corporations. Most of these do not necessarily care about possessing the currencies themselves, but rather prefer to speculate or hedge against future exchange rate fluctuations. For instance, traders might buy US dollars and sells euros, if they think the dollar will strengthen in value. Consequently, they will be able to buy more euros in the future.

How Currencies are traded

Another highly popular currency in the forex market is the euro (EUR), which is the currency accepted in 19 countries of the European Union. Other major currencies include: the Japanese yen (JPY), the British pound (GBP), the Australian dollar (AUD), the Canadian dollar (CAD), the Swiss franc (CHF) and the New Zealand dollar (NZD). The combination of the two currencies being exchanged is how forex trading is expressed.

 

Below are seven currency pairs, also known as the majors, which account for more or less 75% of trading in the forex market:

                          EUR/USD           USD/JPY           GBP/USD

AUD/USD           USD/CAD           USD/CHF           NZD/USD

                          EUR/USD           USD/JPY           GBP/USD

AUD/USD           USD/CAD           USD/CHF           NZD/USD

Forex Terms to know

                                         Pip                 

A pip refers to the smallest possible change in price within a currency pair. A pip is equal to 0.0001.

                                         Pip                 

A pip refers to the smallest possible change in price within a currency pair. A pip is equal to 0.0001.

                                        Bid-ask spread

The difference between the maximum amount traders buy (the bid) and the minimum amount they sell (the ask) is the bid-ask spread. This is the value that these two amounts will eventually get executed at.

Bid-ask spread

The difference between the maximum amount traders buy (the bid) and the minimum amount they sell (the ask) is the bid-ask spread. This is the value that these two amounts will eventually get executed at.

                                      Lot

Also known as a standardised unit of currency, forex is traded by lots. The most common lot size is 100,000 units of currency. There are micro (1,000) and mini (10,000) lots available for trading.

  Lot

Also known as a standardised unit of currency, forex is traded by lots. The most common lot size is 100,000 units of currency. There are micro (1,000) and mini (10,000) lots available for trading.

                                    Leverage

Since some traders may not be willing to pay so much money as the lot size, leverage is the strategy of using borrowing money to increase the return of an investment. This allows participation in the forex market without paying the otherwise required amount of money.

Leverage

Since some traders may not be willing to pay so much money as the lot size, leverage is the strategy of using borrowing money to increase the return of an investment. This allows participation in the forex market without paying the otherwise required amount of money.

                                  Margin

Trading with leverage, however, is not free. Therefore, the deposit traders put upfront is called margin.

Margin

Trading with leverage, however, is not free. Therefore, the deposit traders put upfront is called margin.

Stock Market

Learn all about the stock market, also known as the equity or share market, and enhance your knowledge and trading skills. Learn about what stocks are, why you should invest in the stocks market, how you can benefit out of this, and much more with FX Street Live. Always bear in mind that investment in the stock market is most frequently done through stockbrokerages and electronic trading platforms with an investment strategy in mind.

Stock Market

Learn all about the stock market, also known as the equity or share market, and enhance your knowledge and trading skills. Learn about what stocks are, why you should invest in the stocks market, how you can benefit out of this, and much more with FX Street Live. Always bear in mind that investment in the stock market is most frequently done through stockbrokerages and electronic trading platforms with an investment strategy in mind.

Euro Exchange Rate

FXstreetlve provides you with everything you need to know about the euro exchange rate, and make comparisons to find the best possible priced currency, in order to meet your needs. This can act as your guidance both before and during the process of making important trading decisions. It is vital to keep an eye on price fluctuations between the euro and other currencies, as this will determine the success of your trading journey as well.

Euro Exchange Rate

FXstreetlve provides you with everything you need to know about the euro exchange rate, and make comparisons to find the best possible priced currency, in order to meet your needs. This can act as your guidance both before and during the process of making important trading decisions. It is vital to keep an eye on price fluctuations between the euro and other currencies, as this will determine the success of your trading journey as well.