Forex Foreign Exchange: Learn before you Earn

Filed in Learn Forex Trading by on August 1, 2008 0 Comments • views: 285

So, you want to earn millions with foreign exchange trading? Well you can’t! You know why? Because you’ve yet to learn the basic things there is to know about forex currency trading. If you start without learning the basics, you’ll only lose your money. So here’s a guide to the basics of foreign exchange concurrency trading.

Forex trading market is currently the largest trading market in the world. It has an average turnover of US $3.2 trillion daily. The basic idea in forex trading is that you buy using a certain currency while simultaneously selling another, or simply, you exchange one currency for the other. Currencies are traded in pairs. Also, the forex market is an over-the counter market. There is no centralized exchange for forex. Every transaction happens via phone or an electronic network like the internet.

You can trade at forex markets anytime, since it is opened 24 hours a day. This means that you can trade even at your spare time. Forex brokers’ trade margin starts at 50, 100, and 150 or even at 200 to 1 trade margin. This indicates that forex traders usually hold a large sum of money. With a 100:1 forex account for example, you can purchase $200000 with just $2000. Some people think that this is a risky move. But fear not!

The daily percentage move of a major currency is just less than 1% but stocks can quickly have a 10% price move on a certain day. With this, you can sell your $200000 and earn bigger money if you sell it at the right time.

The time you need to sell it depends on a countries’ weather, political stability, etc. Once the price of the currency you have has increased greatly, you can sell it now to gain a big profit. And you only need a couple of things to earn this much money: First is a computer with an internet connection and then you‘ll also needs a forex account.

Now let’s learn the quotes used in forex trading.
Forex trading uses quotes to easily understand currencies that they’ll exchange, like EURUSD, USDJPY, EURAUD, etc.
These quotes represent two currencies of two countries that are used for forex. The first three letters and the last three letters make an acronym for the countries’ currency.

For example, EUR means euro, Europe’s currency and USD means US dollars. The first currency in the quote is the base currency, which means its value is always 1. The next concurrency indicates how much of that concurrency amounts to the base concurrency. For example, in EURUSD, its how many US dollars will amount to one euro?

Other quotes to learn are bid ask and spread. For example, the USDJPY is 1.3455-1.3460; the bidding price is the 1.3455 while the 1.3460 is the asking price. Bidding price is the amount that you want to sell the base currency while the asking price is the amount you spent to buy the base currency. The difference between them is called spread. A pip in forex is the smallest value. It is the last decimal place of the spread.

Example: EURUSD – 1.3455-1.3460; When you sell 1 euro, you gain US $1.3455; When you buy 1 euro, you buy it for US $1.3460. The spread here is 0.0005 so your pip is 0.0001. The trade margin in forex as mentioned before, the normal margin is 100:1, 150:1 or even 200:1. You choose a minimum account size from the trade margins, deposit your money and then you can begin the trade. This sums up the basics in forex trading. There are a lot more things you need to learn about forex trading. Make sure you learn the advance methods to trade in Forex. Good luck!

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