New to FOREX? Or have you loss your investment in trading?
the question is why is it that people lost so much money in trading forex?
If you want to know then I encourage you to continue faithfully with this site.
The truth of the matter is this there is no where money comes from that is as easy
as most people that introduced their fellow human to this game profess it to be.
What I want you to know is this, for you to make it in forex you must be dedicated,
patient and have thorough knowledge about how the business of forex is being conducted
just like in every other profession in this world. Knowledge is the key to success!
Honest Forex free Signal is the right choice! You will learn all the basics including
money management strategies, the trading platform meta-trader, how to conduct basic
analysis and so much more. A great start into the forex world! Familiar Chart Patterns
and Trend lines. Be Smart to Filter Various Currency pairs. Confident to Control Up
and Down Trendy. And above all honest signal will be give free signal on this very
blog I mean free.
Understanding the Basics of Currency Trading
Bid/Ask Spread
All currency pairs are commonly quoted with a bid and ask price.
The bid (always lower than the ask) is the price your broker is willing to buy at,
thus the trader should sell at this price. The ask is the price your broker is willing
to sell at, thus the trader should buy at this price.
EUR/USD 1.2545/48 or 1.2545/8
The bid price is 1.2545
the ask price is 1.2548
A Pip
A pip is the minimum incremental move a currency pair can make. Pip stands for
price interest point. A move in the EUR/USD from 1.2545 to 1.2560 equals 15 pips.
And a move in the USD/JPY from 112.05 to 113.10 equals 105 pips.
Margin Trading (leverage) In contrast with other financial markets where you
require the full deposit of the amount traded, in the Forex market you require
only a margin deposit. The rest will be granted by your broker.
The leverage provided by some brokers goes up to 400:1. This means that you
require only 1/400 or .25% in balance to open a position (plus the floating gains/losses.)
Most brokers offer 100:1, where every trader requires 1% in balance to open a
position.
The standard lot size in the Forex market is $100,000 USD.
For instance, a trader wants to get long one lot in EUR/USD and he or she is
using 100:1 leverage. To open such position, he or she requires 1% in balance or $1,000 USD.
Of course it is not advisable to open a position with such limited funds in our trading balance.
If the trade goes against our trader, the position is to be closed by the broker.
This takes us to our next important term.
Margin Call
A margin call occurs when the balance of the trading account falls below the maintenance margin (capital required to open one position, 1% when the leverage used is 100:1, 2% when leverage used is 50:1, and so on.) At this moment, the broker sells off (or buys back in the case of short positions) all your trades,
leaving the trader “theoretically” with the maintenance margin. Most of the time
margin calls occur when money management is not properly applied.
the question is why is it that people lost so much money in trading forex?
If you want to know then I encourage you to continue faithfully with this site.
The truth of the matter is this there is no where money comes from that is as easy
as most people that introduced their fellow human to this game profess it to be.
What I want you to know is this, for you to make it in forex you must be dedicated,
patient and have thorough knowledge about how the business of forex is being conducted
just like in every other profession in this world. Knowledge is the key to success!
Honest Forex free Signal is the right choice! You will learn all the basics including
money management strategies, the trading platform meta-trader, how to conduct basic
analysis and so much more. A great start into the forex world! Familiar Chart Patterns
and Trend lines. Be Smart to Filter Various Currency pairs. Confident to Control Up
and Down Trendy. And above all honest signal will be give free signal on this very
blog I mean free.
Understanding the Basics of Currency Trading
Investors and traders around the world are looking to the Forex market as a new
speculation opportunity. But, how are transactions conducted in the Forex market?
Or, what are the basics of Forex Trading? Before adventuring in the Forex market
we need to make sure we understand the basics, otherwise we will find ourselves
lost where we less expected. This is what this article is aimed to, to understand the
basics of currency trading.
What is traded in the Forex market?
The instrument traded by Forex traders and investors are currency pairs.
A currency pair is the exchange rate of one currency over another.
The most traded currency pairs are:
EUR/USD: Euro
GBP/USD: Pound
USD/CAD:Canadian dollar
USD/JPY: Yen
USD/CHF:Swiss franc
AUD/USD: Aussie
These currency pairs generate up to 85% of the overall volume generated in
the Forex market. So, for instance, if a trader goes long or buys the Euro, she
or he is simultaneously buying the EUR and selling the USD. If the same trader
goes short or sells the Aussie, she or he is simultaneously selling the AUD and
buying the USD. The first currency of each currency pair is referred as the base
currency, while second currency is referred as the counter or quote currency.
Each currency pair is expressed in units of the counter currency needed to get one
unit of the base currency. If the price or quote of the EUR/USD is 1.2545, it means
that 1.2545 US dollars are needed to get one EUR
speculation opportunity. But, how are transactions conducted in the Forex market?
Or, what are the basics of Forex Trading? Before adventuring in the Forex market
we need to make sure we understand the basics, otherwise we will find ourselves
lost where we less expected. This is what this article is aimed to, to understand the
basics of currency trading.
What is traded in the Forex market?
The instrument traded by Forex traders and investors are currency pairs.
A currency pair is the exchange rate of one currency over another.
The most traded currency pairs are:
EUR/USD: Euro
GBP/USD: Pound
USD/CAD:Canadian dollar
USD/JPY: Yen
USD/CHF:Swiss franc
AUD/USD: Aussie
These currency pairs generate up to 85% of the overall volume generated in
the Forex market. So, for instance, if a trader goes long or buys the Euro, she
or he is simultaneously buying the EUR and selling the USD. If the same trader
goes short or sells the Aussie, she or he is simultaneously selling the AUD and
buying the USD. The first currency of each currency pair is referred as the base
currency, while second currency is referred as the counter or quote currency.
Each currency pair is expressed in units of the counter currency needed to get one
unit of the base currency. If the price or quote of the EUR/USD is 1.2545, it means
that 1.2545 US dollars are needed to get one EUR
Bid/Ask Spread
All currency pairs are commonly quoted with a bid and ask price.
The bid (always lower than the ask) is the price your broker is willing to buy at,
thus the trader should sell at this price. The ask is the price your broker is willing
to sell at, thus the trader should buy at this price.
EUR/USD 1.2545/48 or 1.2545/8
The bid price is 1.2545
the ask price is 1.2548
A Pip
A pip is the minimum incremental move a currency pair can make. Pip stands for
price interest point. A move in the EUR/USD from 1.2545 to 1.2560 equals 15 pips.
And a move in the USD/JPY from 112.05 to 113.10 equals 105 pips.
Margin Trading (leverage) In contrast with other financial markets where you
require the full deposit of the amount traded, in the Forex market you require
only a margin deposit. The rest will be granted by your broker.
The leverage provided by some brokers goes up to 400:1. This means that you
require only 1/400 or .25% in balance to open a position (plus the floating gains/losses.)
Most brokers offer 100:1, where every trader requires 1% in balance to open a
position.
The standard lot size in the Forex market is $100,000 USD.
For instance, a trader wants to get long one lot in EUR/USD and he or she is
using 100:1 leverage. To open such position, he or she requires 1% in balance or $1,000 USD.
Of course it is not advisable to open a position with such limited funds in our trading balance.
If the trade goes against our trader, the position is to be closed by the broker.
This takes us to our next important term.
Margin Call
A margin call occurs when the balance of the trading account falls below the maintenance margin (capital required to open one position, 1% when the leverage used is 100:1, 2% when leverage used is 50:1, and so on.) At this moment, the broker sells off (or buys back in the case of short positions) all your trades,
leaving the trader “theoretically” with the maintenance margin. Most of the time
margin calls occur when money management is not properly applied.
How are the mechanics of a Forex trade?
The trader, after an extensive analysis, decides there is a higher probability of the
British pound to go up. He or she decides to go long risking 30 pips and having
a target (reward) of 60 pips. If the market goes against our trader he/she will lose
30 pips, on the other hand, if the market goes in the intended way, he or she will
gain 60 pips. The actual quote for the pound is 1.8524/27, 4 pips spread.
Our trader gets long at 1.8530 (ask). By the time the market gets to either our
target (called take profit order) or our risk point (called stop loss level) we will
have to sell it at the bid price (the price our broker is willing to buy our position
back.) In order to make 60 pips, our take profit level should be placed at 1.8590
(bid price.) If our target gets hit, the market ran 64 pips (60 pips plus the 4 pip
spread.) If our stop loss level is hit, the market ran 26 (26 pips plus the 4 pip
spread equals 30 pips) pips against us.
It’s very important to understand every aspect of trading.
Start first from the very basic concepts, then move on to more complex issues
such as Forex trading systems, trading psychology, trade and risk management,
and so on. And make sure you master every single aspect before adventuring
in a live trading account.
The trader, after an extensive analysis, decides there is a higher probability of the
British pound to go up. He or she decides to go long risking 30 pips and having
a target (reward) of 60 pips. If the market goes against our trader he/she will lose
30 pips, on the other hand, if the market goes in the intended way, he or she will
gain 60 pips. The actual quote for the pound is 1.8524/27, 4 pips spread.
Our trader gets long at 1.8530 (ask). By the time the market gets to either our
target (called take profit order) or our risk point (called stop loss level) we will
have to sell it at the bid price (the price our broker is willing to buy our position
back.) In order to make 60 pips, our take profit level should be placed at 1.8590
(bid price.) If our target gets hit, the market ran 64 pips (60 pips plus the 4 pip
spread.) If our stop loss level is hit, the market ran 26 (26 pips plus the 4 pip
spread equals 30 pips) pips against us.
It’s very important to understand every aspect of trading.
Start first from the very basic concepts, then move on to more complex issues
such as Forex trading systems, trading psychology, trade and risk management,
and so on. And make sure you master every single aspect before adventuring
in a live trading account.
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