Forex

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Forex (short for Foreign Exchange market, FX) is the global currency trading market. With a daily volume of more than USD 5 trillion, it is the most exciting and powerful financial market in the world.

Global FX is the largest, most liquid and most diverse market in the world. FX is available for trading 24/5. Forex means you are essentially speculating on the strength of one country's economy against another. Forex is usually quoted to 5 digits after the decimal, providing much more accurate pricing on instruments allowing you to make or lose money based on very small movements in price.

All FX is quoted in pairs. Pairs exist in only one combination, because the ability to buy and sell makes it possible to trade that pair in both directions. The first currency in the pair is called the BASE currency, and is the currency that you chose to either Buy or Sell. The second currency is called the TERM (or QUOTE) currency, which is the currency in which the pair is quoted.

 

WHAT IS FOREX?

Forex (or FX) stands for FOREIGN EXCHANGE and is the term used to describe the value of one currency in relation to another. Global FX is the largest, most liquid and most diverse market in the world. FX is available for trading 24/5. Forex means you are essentially speculating on the strength of one country's economy against another. Forex is usually quoted to 5 digits after the decimal, providing much more accurate pricing on instruments allowing you to make or lose money based on very small movements in price.

All FX is quoted in pairs. Pairs exist in only one combination because the ability to buy and sell makes it possible to trade that pair in both directions. The first currency in the pair is called the BASE currency and is the currency that you chose to either Buy or Sell. The second currency is called the TERM (or QUOTE) currency, which is the currency in which the pair is quoted.

Each pair has a Bid price and an Ask price. The Bid price is the price the broker is willing to buy for, and the Ask price is the price at which the broker is willing to sell. In the market watch, all of the Bid/Ask prices are quoted in the value of the Term currency and represent the value of ‘1’ of the Base currency.

The price for EUR/GBP shows for instance that €1 is equal to £0.73 (graphic below).


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LET US LOOK AT SOME EXAMPLES WHEN TRADING:

When we look at EURUSD, it states how the USD behaves traded against EUR. If prices go up, the EUR is stronger than USD, if prices fall, the USD is stronger than EUR. All of the FX and CFDs have also a so called "Bid-Ask" Spread.

That results from the fact that there is always a "Sell" Price (Bid) and a "Buy" Price (Ask). When I decide to "sell" a fx /cfd symbol or a Index, I will bet on a falling price. If I decide to "buy" a fx / cfd symbol, I bet on rising prices. This also means that my "entry" point for a sell position is the "sell" price or the "bid price". My entry point if I think that the symbol will rise, is the "buy" or "ask" price. 

If we now take a look at EURUSD we will use this example:
Sell (bid price): 1.11516
Buy: (ask price): 1.11628 

This also means that there is a delta between those prices, which is always calculated: Buy minus Sell = Delta
1.11628 - 1.11516 = 0.00112 -> This is called: "Bid/Ask Spread"
The Spread is basically the fee that you pay when you trade forex or CFDs. The larger the spread, the more expensive it is for you to trade.

 

WHY DO BROKERS MAKE ME RICHER? AND WHY DO THEY TAKE SO MUCH TO LEND ME MONEY?

Easy: They earn on the bid/ask spread and the higher the traded volume, the more they can benefit of smallest price movements.

 

WHY WE NEED RISK MANAGEMENT?

As you see, a tiny price movement combined with the leverage and the specific pip value, can cause big losses. This is why NAGA TRADER encourage everyone to set a Stop Loss and Take Profit Level.

So, you’ve learned some things about Forex. We suggest that you go to NAGA TRADER and explore 700+ markets including Forex. Use the platform extensively to take advantage over fast growing Forex market.

Read about how to open a live account and start trading and using all benefits of the platform here.

 


 

If you need further assistance, please do not hesitate to contact our staff.

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