What You Need to Know About Forex Trading as a Beginner
Foreign exchange or forex trading currency is easier as before because of the existence of three types of account namely the micro lots, mini lots, and standard lot. It is important for a beginner to understand what forex means, which is the shorthand of foreign exchange market, wherein currencies are required to be exchanged in order to facilitate international trade and foreign business transactions. For instance, if an American wants to buy something in Japan, his dollars need to be converted to yen before he is allowed to do so. The most liquid market in the world if Forex, with trades running up to two thousand billion US dollars, and all transactions are done online via computer, for 24 hours a day in different time zones. First-time investors can get started with a micro account for only $50. If you are a first-timer, you need to equip yourself with the right knowledge about the forex market, and it will be a lot easier if you have been trading stocks online.
The basic terminologies you have to learn include PIP, base currency, cross currency pair, currency pair, and quote currency. The acronym PIP refers to Percentage in Point or Price Interest Point which is the smallest value of change in currency pair in the foreign exchange market. There is varying value of pips for your trade depending on the size of your lot when you are trading, and spread refers to the difference in pips between the bid and ask. The spread is how forex brokers make money since they don’t collect an official commission. When trading, a positive pip means your trade is earning, while a negative pip indicates that your trade is not in good shape. As an accounting currency or domestic currency, base currency refers to the first currency that is quoted in a forex currency pair. The cross currency pair is any pair of foreign currencies but not including US dollars. Currency pair includes the base currency and the quote currency, which is the pricing structure and quotation of the currencies traded in forex, and the currency value is highly determined by its comparison to another currency.
Always remember that when you’re engaged in forex, you are actually buying and selling currencies, and the action is being performed on the base currency. For example, when selling EUR/USD, the trader is selling euros and buying US dollars (pair trade). Let’s say, if the EUR/USD rises from 1.5025 to 1.529, the EUR/USD has risen 4 pips which is positive, and it means you’re earning. Allow us to share more valuable information about forex by visiting our homepage or website today so you can learn the art and skills of foreign exchange trade for a more successful transaction every time!