The Foreign Exchange market, also referred to as the "Currency", "Forex" or "FX" market is the largest financial market in the world, and includes trading between large banks, central banks, currency speculators, multinational corporations, governments, and other financial markets and institutions with a daily average turnover of over US $ 2 trillion.
The International currency market FOREX is the youngest currency market developed from all segments of the financial markets. The major principle of work in the currency market consists in an exchange of one currency for another with the purpose of receiving profit on a difference of rates. Exchange rates vary under the influence of a supply and demand on the currency of a stable country. A supply and demand, in turn, depend on macro economic news, political and other world events.
Transactions in FOREX market are carried out by a principle of margin trade which allows a trader to conclude transactions for amounts considerably greater than his starting capital. Credit transactions, with a leverage provides the basis on which the trader opens the trading account.
The appeal of investment in this market is also connected with the speed of the fulfillment of the transaction. The market works round the clock, transactions are made on the internet, through a secured access, or by a telephone system. Basically forex trading is the selling of one currency against another currency.
Example :
You will see listed GBP/USD. This stands for the exchange rate of the Poundsterling when compared against the USA Dollar. If it was the USD/JPY this would be the USA Dollar against the Japanese Yen. The currency first quoted is the one you will be buying and selling.
Buying a currency is also called going Long.
Selling a currency is also called going Short.
So, if you believe that the GBP is gaining strength or going to go higher against the USD you would BUY (Long) GBP/USD. If you believe that the GBP is getting weaker or going to go down against the USD, you would SELL (Short) GBP/USD. The term used to describe each individual decimal point of a currency is a PIP.
ex:
If the GBP/USD traded at 1.9900 and moved to 1.9925, this would be a move of 25 pips If the USD/JPY traded at 127.00 and moved to 126.50, this would be a move of 50 pips. There will be a spread on the Buy and Sell levels which will be set by your broker. Most dealers set the spread at around 3-8 pips.
The International currency market FOREX is the youngest currency market developed from all segments of the financial markets. The major principle of work in the currency market consists in an exchange of one currency for another with the purpose of receiving profit on a difference of rates. Exchange rates vary under the influence of a supply and demand on the currency of a stable country. A supply and demand, in turn, depend on macro economic news, political and other world events.
Transactions in FOREX market are carried out by a principle of margin trade which allows a trader to conclude transactions for amounts considerably greater than his starting capital. Credit transactions, with a leverage provides the basis on which the trader opens the trading account.
The appeal of investment in this market is also connected with the speed of the fulfillment of the transaction. The market works round the clock, transactions are made on the internet, through a secured access, or by a telephone system. Basically forex trading is the selling of one currency against another currency.
Example :
You will see listed GBP/USD. This stands for the exchange rate of the Poundsterling when compared against the USA Dollar. If it was the USD/JPY this would be the USA Dollar against the Japanese Yen. The currency first quoted is the one you will be buying and selling.
Buying a currency is also called going Long.
Selling a currency is also called going Short.
So, if you believe that the GBP is gaining strength or going to go higher against the USD you would BUY (Long) GBP/USD. If you believe that the GBP is getting weaker or going to go down against the USD, you would SELL (Short) GBP/USD. The term used to describe each individual decimal point of a currency is a PIP.
ex:
If the GBP/USD traded at 1.9900 and moved to 1.9925, this would be a move of 25 pips If the USD/JPY traded at 127.00 and moved to 126.50, this would be a move of 50 pips. There will be a spread on the Buy and Sell levels which will be set by your broker. Most dealers set the spread at around 3-8 pips.