• USD/AUD 1.2615 -0.0110(-0.011%)
  • USD/CAD 1.2625 -0.0089(-0.009%)
  • USD/GBP 0.77708 +0.0013(+0.001%)
  • USD/EUR 0.85492 +0.0040(+0.004%)

What is Forex Trading?

Since the creation of the internet, investment has become more accessible. Today, practically anyone can play the markets to realize extra income or create a retirement savings. One of the most popular forms of investment in the world of digital trading is Forex, or foreign exchange, trading. Forex trading involves trading on the price fluctuations between different global currencies, making it at the same time one of the most flexible and one of the largest trading markets imaginable.

Forex trades are binary positions, meaning that there are only two options in any one trade. The first option is that the overall ratio of value between the two currencies in a given pair will increase, while the second is that it will decrease. A trading position that predicts an increase in the value ratio is known as a “Call” option, while one that predicts a decrease is known as a “Put.” Once one of these two positions has been opened, the movement of the currency will determine whether or not the given prediction was correct. Calls and Puts actually represent a reserved option to buy or sell at certain prices, which is the underlying way in which currencies, and therefore the respective marginal gains made from their value fluctuations, are transferred.

The outcome of the prediction will also determine whether or not the trade was profitable. If a Call position is opened on a currency pair whose value ratio then decreases, the trader who opened that position will lose money. If, on the other hand, the value ratio increases, the trader will be able to profit. Keep in mind that the outcome can vary based on time. A currency pair’s ratio of value can decrease for a period of time before eventually going above the starting point, resulting in a profitable trade.

 

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Forex Currency Pairs: The Basis of All Forex Trades

Before jumping into the specifics of Forex trading, it’s important to understand what Forex currency pairs are. All Forex trades are based on sets of paired currencies. Though there are many Forex pairs, the most commonly traded are the EUR/USD, GBP/USD, AUD/USD and USD/JPY. Other pairs, such as the AUD/JPY, are of course available. When dealing with trades, these pairs actually represent the value ratio between the two currencies. At any time, the value of the first currency in a pair is compared to one of the second currency. A ratio of 1.42 on the GBP/USD pair, for example, would mean that one British pound was worth $1.42 in American dollars.

How does Forex works?

Forex is an acronym for Foreign Exchange market and it cannot be compared with the common stock exchanges such as Nasdaq and the Tokyo stock exchange. On the Forex market currencies are exchanged between the central bank and brokers. Currencies can be traded in pairs (e.g EUR/USD) this pair expresses the price of the euro in US dollars. As in 1 Euro = 1.3000 USD

Price changes are displayed in pips, so making or losing money depends on pips. For example if you own 100,000 currency pairs and the pip has changed 5 points from 1.3000 to 1.3005 you will earn 50$ (0.0005*100,000) Our advice to the starters is to begin dealing with small pairs.

Forex is an acronym for Foreign Exchange market and it cannot be compared with the common stock exchanges such as Nasdaq and the Tokyo stock exchange. On the Forex market currencies are exchanged between the central bank and brokers. Currencies can be traded in pairs (e.g EUR/USD) this pair expresses the price of the euro in US dollars. As in 1 Euro = 1.3000 USD

Price changes are displayed in pips, so making or losing money depends on pips. For example if you own 100,000 currency pairs and the pip has changed 5 points from 1.3000 to 1.3005 you will earn 50$ (0.0005*100,000) Our advice to the starters is to begin dealing with small pairs.

ForexTrading.org offers you weekly trading advice. This advice often contains safety information, rules for the Forex market or hints & tips to improve your earnings. Make sure to check the page weekly to get the most recent advice. You can also take a look at our Forex tips.

ForexTrading.org – Leading Forex Guide since 2004

ForexTrading.org helps starting traders to find their way on the Forex market. The information provided on our website is free of charge and 100% reliable. We will discuss different Forex Brokers, all brokers on our website accept free demo account for practise. (Forex brokers are companies that can give you access to the Forex market).

The best Forex brokers, articles and more relevant information can be found on our website. We compare different account types and Forex brokers to make sure that you are well informed and can choose the right Forex broker for you!

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