INTRODUCTION TO FOREX TRADING
INTRODUCTION TO FOREX
THE FOREX MARKET
The forex market is the fastest growing market. Its daily turnover is about 6.9 trillion dollars. The traders in this market are inter-banks, hedge funds, individual like me and you
WHAT HAPPENS IN THE FOREX MARKET
As you know a market is a place where goods are traded this applies same with forex. A forex market is a place where currencies are traded. For example You might buy British pounds [GBP] with US dollars [USD] or sell Euro for US dollars. It’s as basic as trading one currency for another.
Of course, you don't have to buy or sell physical currencies you can actually trade your own base currency, or any currency you want to trade with.
WHAT ARE TRADED IN A FOREX MARKET
- Currency pairs
- Cryptocurrency
- Crude oil
- Stocks
WHAT IS LEVERAGE
'LEVARAGE' is originally a forex advantage.
Leverage is the amount of money borrowed from the broker. Let’s assume that a trader opened his account with $2,000, and is currently trading a $50,000 position.
The leverage on this trade can be shown as 25:1. Or, to put it in another way, the trader is controlling $25 of capital for every $1 in his account.
Remember margin had to be put up in order to secure the position before it was ever executed, and that amount was $1000. This means that our trader would have $1,000 in ‘free margin’, or capital that isn’t currently tied-up in securing a position. This is capital that can be used to pursue new positions or to support currently-held trades
Leverage is the actual ratio of investment. Using $1000 to buy a forex contract of $100,000 value is what is called leveraging. The $1000 is all your investment but you will make much profit.
MARGIN
Margin is the capital that your broker must hold in order to secure a position. This amount will be different according to the currency pair, but will be a percentage of the overall size of the trade.
It is always advisable to take a margin factor of 2% for a position.
WHAT ARE THE BASIC ESSENTIALS TO START FOREX TRADING
- A good Internet connection.
- A smart phone.
- A capital.
- And a trading account registered to a trading platform [Broker].
WHAT IS A TRADING PLATFORM
A trading platform is software used to carry out all forex activities.
This are:
- FBS
MT4
Mt5
OCTAfx
Mobile Metatrader and others
Okay guys, On my next post I will be talking about some basic terms used in the forex also how to trade forex and make profit.
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