About Forex Trading Basic Concepts
Learning how to trade in a new market is like learning a new language. It’s easier if you have a good vocabulary and understand some basic concepts and related concepts. So let’s start with the basics of Forex trading before you learn how to use the trading station. For more information on the forex market, download the Forex Guide for FXBY Newbies.
Lets Learn about Forex
Forex is a common abbreviation for “foreign currency”. This usually describes the buying and selling of currencies in the foreign exchange market, especially by investors and speculators. The well-known phrase “buy low and sell high” definitely applies to the foreign exchange trade. The forex trader buys currencies that do not appreciate and sell currencies, just as a stock trader buys shares because he values and sells overvalued stocks.
Since you always compare one currency to another, forex is expressed in a currency pair that may seem confusing at first glance, but actually it is quite simple: For example, EUR / USD at 1.4022 shows how much EUR 1 in USD is expressed.
Talk about a lot
Much is a small trade size available. Several broker accounts have a default size of 1,000 currency units. However, account holders can enter orders of different sizes, provided they are 1,000, such as 2,000, 3,000, 15,000, 112,000, and so on.
What is a PIP?
Pips is the only unit in which winnings and losses are valued for most currency pairs except for pairs between the Japanese and expressed in four decimal places. The fourth place after stopping (one hundred percent of the currency unit) is usually the so-called “pip”. Each point that moves in the quote is 1 movement point. For example, when EUR / USD rises by 1.4022-1.4027, EUR / USD has risen by 5 pips.
As mentioned above, all transactions are performed by borrowing. This allows you to use the lever. With a leverage of 30: 1 you can exchange 1,000 euros in the market by depositing only 5 euros as a deposit. This means that even the smallest currency movements can be exploited by checking in more money in the market than on your account. Beside that we must be aware that leverage will be increase our losses if we not really understand about it. Forex trading with a leverage effect may not be suitable for all types of investors