Putting your money to a right place makes you a successful entrepreneur. That is why currency trading today is one of most speculated area of future investors. Forex market is the new speculation opportunity for those who are in to investing and trading. Below are some gathered ideas on basic currency trading and what you can you to begin.
This market allows for more advanced investing and trading strategies like hedging that can greatly increase the stability of your investments.
Understand what is being traded in the market. A currency pair is the instrument traded by the Forex traders and investors. It is the exchange rate of one currency over the other. These currency pairs generate up to 85% of the overall volume generated in the Forex market. TIP: Top 3 most traded currency pairs are EUR/USD: Euro, GBP/USD: Pound and USD/JPY: Yen
On basic current trading, all your currency pairs are quoted with a bid and ask price. The bid which is lower that the ask is the price your broker is willing to buy at, hence the trader should sell at this price. The ask is the price your broker is willing to sell at, hence the trader should buy at this price.
Another thing to know is the minimum incremental move a currency makes; a pip or price interest point. Let say, a move in EUR/USD from 1.2545 to 1.2560 is equivalent to 15 pips.
Compared to other financial markets that require full deposit of the amount traded, Forex market only require a margin deposit and the rest will be provided by your broker. The leverage or margin trading usually is at 400:1 or .25% in balance to open a position but mostly, it’s at 100:1 or 1%.
The mechanics on trading is that, after extensive analysis of the trader, he decides there is a higher probability of the British pound to go up. He will then decide to go risking 30 pips with a target of 60 pips. So, if the market goes against you as the trader, you will lose 30 pips, or when otherwise, you will gain 60 pip.