I believe this personal view I obtained from researching Forex Trading Tutorial may help common/ordinary person understand about currency exchange at a glance.
forex means foreign-exchange. First, let me outline a few terms that will be used. Here, we're going to see what a pair looks like :
EUR/USD 1.3642 1.3644
The base currency is EU Buck and quote currency is US dollar which means that you get 1.3642 US buck when you sell 1 euro ( taking short position ) or get/buy one euro at 1.3644 US dollars ( taking long position )
Quoted pairs always involve 2 country currencies like EURO/USD. Among the countries paired with USD are : Swiss CHF, Australia AUD, Japan JPY, Great British GDP and Canada CAD. Pairs that do not involve USD are called Cross Rates.
Spread is the difference between base and quoted prices ( $0.0002 ) ( 02 of a cent ) and is measured in pips ( p.c. in points or price interest point ) ( 2pips ).
It is possible to control $10,000 with only $100 or $50 available cash. With high leverage/margin trading, you can control fifty, one hundred or two hundred times the amount you commit on borrowed capital. Similarly with high liquidity, you can close trading when you're losing or have gained. One lot is the term for 100,000 units or 10,000 units, with units in dollars, EU$, pounds for example.
How is currency trading done?
we'll need a computer, a high speed net connection, a good system or time to learn and develop our own system and eventually money to invest.
When do we buy or sell our quote? Best time to buy quotes is during rising trend of base currency relative to the quote currency, selling them afterward when the trend is downfall. Best time for trading is London and Manhattan based time. London time is 8.00 UTC ( 3AM EST ) that finishes at 16.00 UTC ( 11.00 EST ). NY time, similarly, is 13.00 UTC ( 8.00 EST ) and finishes at 21.00 UTC ( 16.00 EST ) with peaks during the first 3 hours that the markets are open.
Example :
You then open trading one lot of 10,000 at 1.3644 or $13,644 and employing a leverage margin of one percent ; you bring out money of only US$136.44 which can put your trading active and you in control.
You wait and finding it has risen 50 pips ( 1.3694 ), you have realized success earning 48 pips and can either decide to sell and close trading or continue.
How much did I earn in this example? Here, one pip is US$1 so you made $48 or 35.05 EU Bucks profit.
What if I lost? On a situation with borrowed capital, you are weighed down to pay outside your capability. Then, protect yourself by ordering swift stop loss or earlier placing automatic stop ( margin call, generally 2 pips ) before the price drops beyond that certain point. Then, use its extremely high liquidity at any point. This time, your broker has to get a buyer before they become a monetary value . It is much easier to find a purchaser for falling currency than it is for falling stock in the countrywide stock exchange.
how do we know which way the price will move? There are two ways to pinpoint the trend : using fundamental criteria ( economic and events ) and technical analysis ( charts )
Here is one method , however , of safe currency trading. Scalping Forex is a quick trading technique where traders allow their position to last only a matter of seconds ; otherwise longer than that is thought of as a regular trading. At that point, if you still need a guide to learn to trade the forex, it is usually recommended that you try one of the finest forex authority in the market : Peter Bain's The currency exchange Money Makers.
Related Article: forex trading tutorial
forex means foreign-exchange. First, let me outline a few terms that will be used. Here, we're going to see what a pair looks like :
EUR/USD 1.3642 1.3644
The base currency is EU Buck and quote currency is US dollar which means that you get 1.3642 US buck when you sell 1 euro ( taking short position ) or get/buy one euro at 1.3644 US dollars ( taking long position )
Quoted pairs always involve 2 country currencies like EURO/USD. Among the countries paired with USD are : Swiss CHF, Australia AUD, Japan JPY, Great British GDP and Canada CAD. Pairs that do not involve USD are called Cross Rates.
Spread is the difference between base and quoted prices ( $0.0002 ) ( 02 of a cent ) and is measured in pips ( p.c. in points or price interest point ) ( 2pips ).
It is possible to control $10,000 with only $100 or $50 available cash. With high leverage/margin trading, you can control fifty, one hundred or two hundred times the amount you commit on borrowed capital. Similarly with high liquidity, you can close trading when you're losing or have gained. One lot is the term for 100,000 units or 10,000 units, with units in dollars, EU$, pounds for example.
How is currency trading done?
we'll need a computer, a high speed net connection, a good system or time to learn and develop our own system and eventually money to invest.
When do we buy or sell our quote? Best time to buy quotes is during rising trend of base currency relative to the quote currency, selling them afterward when the trend is downfall. Best time for trading is London and Manhattan based time. London time is 8.00 UTC ( 3AM EST ) that finishes at 16.00 UTC ( 11.00 EST ). NY time, similarly, is 13.00 UTC ( 8.00 EST ) and finishes at 21.00 UTC ( 16.00 EST ) with peaks during the first 3 hours that the markets are open.
Example :
You then open trading one lot of 10,000 at 1.3644 or $13,644 and employing a leverage margin of one percent ; you bring out money of only US$136.44 which can put your trading active and you in control.
You wait and finding it has risen 50 pips ( 1.3694 ), you have realized success earning 48 pips and can either decide to sell and close trading or continue.
How much did I earn in this example? Here, one pip is US$1 so you made $48 or 35.05 EU Bucks profit.
What if I lost? On a situation with borrowed capital, you are weighed down to pay outside your capability. Then, protect yourself by ordering swift stop loss or earlier placing automatic stop ( margin call, generally 2 pips ) before the price drops beyond that certain point. Then, use its extremely high liquidity at any point. This time, your broker has to get a buyer before they become a monetary value . It is much easier to find a purchaser for falling currency than it is for falling stock in the countrywide stock exchange.
how do we know which way the price will move? There are two ways to pinpoint the trend : using fundamental criteria ( economic and events ) and technical analysis ( charts )
Here is one method , however , of safe currency trading. Scalping Forex is a quick trading technique where traders allow their position to last only a matter of seconds ; otherwise longer than that is thought of as a regular trading. At that point, if you still need a guide to learn to trade the forex, it is usually recommended that you try one of the finest forex authority in the market : Peter Bain's The currency exchange Money Makers.
Related Article: forex trading tutorial
