The Basics of Forex Trading

Trading any investment market is very difficult, as evidenced by the fact that most beginners lose money. However, with the right education, practice, and experience, one can be successful. So what is forex trading and is it right for you? The currency market or Forex (FX) is the largest investment market in the world and continues to grow every year foreign exchange market today. In April 2010, the forex market averaged $ 4 trillion in daily volume, a 20% increase from 20071. By comparison, the New York Stock Exchange (NYSE) has only $ 25 billion in daily volume. The market may be large, but until recently the volume came from professional traders, but as forex trading platforms improved, more and more retailers found that the forex market was suitable for their investment purposes.



How Does it Work?

Currency trading is a 24-hour market that is only closed from Friday night to Sunday night, but 24-hour trading sessions are deceptive. There are three sessions that include European, Asian and American trading sessions. While there is some overlap in the sessions, the major currencies in each market are primarily traded during these market hours. This means that some currency pairs will have more volume during certain sessions. Traders who stick to dollar-based pairs will find most of the volume during the US trading session.

Pairs and Pips

All currency trading is done in pairs. Unlike the stock market, where you can buy or sell a single stock, the forex market requires you to buy one currency and sell another. So almost all currencies are quoted to the fourth decimal place. One pip, or percentage point, is the smallest step in trading. One pip is usually equal to 1/100 of 1%. A pip (percentage in points) is the smallest step in trading forex trading platforms in India. A pip is usually equal to 1/100 of 1%, or the number to the fourth decimal place. Most coins are calculated to the fourth or fifth decimal place. Currency pairs that contain the Japanese yen (JPY) as the quote currency are excluded from this rule. These pairs are generally evaluated to two or three decimal places, with one pip represented by the second decimal place. Retailers or newbies often trade currency in micro lots, as one pip in a micro lot only represents a 10 cent price movement. This makes it easier to manage losses when a transaction does not produce the expected results. In a mini lot, one pip equals $ 1 and the same pip in a standard lot equals $ 10.





Far Fewer Products

Most of the volume of Forex trading is limited to just 18 currency pairs compared to the thousands of stocks available on the global equity markets. While there are other trading pairs besides 18, the eight most commonly traded currencies are the US dollar (USD), the Canadian dollar (CAD), the euro (EUR), the British pound (GBP), the Swiss franc (CHF), and the New Zealand dollar (NZD)), Australian dollar (AUD) and Japanese yen (JPY) about foreign exchange market. While no one would say that currency trading is easy, far fewer trading options make trading and portfolio management easier.

What Moves Currencies?

More and more stock traders are interested in the currency markets because there are many forces that move the stock market that also move the currency market. One of the most important is supply and demand. When the world needs more dollars, the value of the dollar goes up, and when there are too many in circulation, the price goes down best broker in India for forex. Other factors such as interest rates, new economic data from major countries, and geopolitical tensions are just some of the events that can affect exchange rates.

The Bottom Line

Like everything in the investment market, learning to trade forex is easy, but finding profitable trading strategies takes a lot of practice. Most forex brokers allow you to open a free virtual account that will allow you to trade virtual money until you find strategies to help you become a successful forex trader.

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