Introduction
What is Forex?
Every business person should know what they are going through before they push through with any ideas they have in mind. Most traders and investors see the Forex market as an easy way to make money or a new opportunity in making money the easy way.
Before making any speculations, why not learn the basics of Forex then know what Forex has to offer.
The first question that will come to mind should be: What exactly is Forex?
Forex is an exchange of one currency to another where people make money on rate fluctuations. In the Forex market people trade currencies in pairs. The most popular pairs are EUR/USD: Euro, GBP/USD: Pound, USD/CAD: Canadian dollar, USD/JPY: Yen, USD/CHF: Swiss franc and AUD/USD: Aussie.
The overall volume of these currencies can generate for as much as 85% of the Forex market.
If we talked about pairing in Forex trading, the first currency in the pair is considered as the base currency and the second currency is considered as the quote currency.
Buying and selling of currencies are done simultaneously in the Forex market. Every currency in pairs is shown in units.
Example: EUR/USD = 1.2545 this means that every 1 Euro = 1.2545 US dollar.
In Forex market transactions, there will always be the bidding price and the selling price.
The price that the broker is allowed to sell his units is the ask price while the price that the broker is allowed to buy is called the bid price. Remember that the bid price is always lower than the ask price.
In this statement, we have this example: EUR/USD: 1.2545 or 1.2548
1.2545 = this is the bid price
1.2548 = this is the ask price
In Forex, aside from the bid and ask price, you will also encounter the word "pip". Pip means the price of interesting point.
Example: EUR/USD=1.2545 went up to 1.2560; the pip here is at 15 pips.
Unlike other trading markets where you are required to deposit the amount of money in full, Forex market traders are only required to deposit an amount of money according to the margin deposit.
Your broker will handle the rest; you are now proving your broker a so-called leverage.
Now, upon learning all the terminologies and basic concepts of Forex, the next question that will come to mind is how will you be able to trade?
Trading comes after you have fully reviewed every detail, after careful analysis on probabilities and after an extensive way of decision making.
Trading is not done with just a flick of the mind. Trading is a process that every trader must consider.
Always bear in mind that it is a vital role for traders to learn the aspect of Forex trading. Begin learning from the basic aspect of Forex then move on to the more complicated issues about this market.
There are subjects on Forex trading systems, trading and risk management, money management, psychology barriers and so on.
What is important is that you have a better understanding of what Forex is all about so you can have a better judgment on trading.