Online Currency - Forex Trading Basics

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Published (Updated) on Sunday, February 2, 2014
The foreign exchange market (FOREX) can also be referred to as Retail forex or Spot FX and is the largest financial market in the world. Unlike other financial market like the New York Stock Exchange, the Forex spot market has neither a physical location nor a central exchange.
In general, the exchange rate of a currency versus other currencies is a reflection of the condition of that country’s economy, compared to the other countries’ economies.

Spot Market: A Spot Market is any market that deals in the currency price of a financial instrument.
Forex Currency Symbols:are always in three letters, where the first two letters identify the name of the country and the third letter identifies the name of that country currency (e.g. USD: United States Dollar)
When to trade Forex:foreign exchange markets follow the sun around the world, so you can trade late at night or in the morning.
Time Zone
New York
GMT
Tokyo Open
7:00 pm
0:00
Tokyo Close
4:00am
9:00
London Open
3:00am
8:00
London Close
12:00pm
17:00
New York Open
8:00am
13:00
New York Close
5:00pm
22:00

Forex market (OTC): Forex market is considered an on the Counter (OTC) or ‘Interbank’ market, due to the fact that the entire market is run electronically, within a network of banks, continuously over a 24-hour period.


Why Trade Foreign Currency?
 No Middle men
High Liquidity
A 24-hour market
Low transaction costs
Free Demo Accounts, News, Charts and Analysis for starters and smart traders.
 Leverage: In Forex trading, a small margin deposit can control a much larger total contract value. For example, Forex brokers offer 200 to 1 leverage, which means that a $50 dollar margin deposit would enable trader to buy or sell $10,000 worth of currencies.
 -No fixed lot size: In forex trading, you determine your own lot size. This allows traders to participate with small accounts.
 - “Mini” and “Micro” Trading for starters and pro alike.

How to read Forex  Quotes: Currencies are always quoted in pairs, such are GBP/USD or USD/JPY. The reason they are quoted in pairs is because in every foreign exchange transaction you are simultaneously buying one currency and selling another.
For example, for exchange rate for the British pound versus the U.S. dollar: [GBP/USD = 1.7500]. The first listed currency (GBP) known as the base currency, while the second one (USD) is called the counter or quote currency. When buying, the exchange rates tells you how much you have to pay in units of the quote currency to buy one unit of base currency.  The quote above shows that you pay 1.7500 U.S. dollars to buy 1 British pound.
When selling, the exchange rate tells you how many units of the quote currency you get for selling one unit of the base currency. In the example above you will receive 1.7500 U.S. dollars when you sell 1 British pound.  The base currency is the “basis” for the buy or sell.


Long/Short: If you are buying in forex  market (which actually means buy the base currency and sell the quote currency) in anticipation that the base currency will rise in value and you would sell it back at higher price, you are taking a “long position”. Note: LONG=BUY.
If you are selling (which actually means sell the base currency and buy the quote currency) in anticipation that the base currency will fall in value and then you would buy it back at lower price, you are taking a “Short position”. Note: SHORT=SELL

Bid/Ask Spread: All Forex  quotes include a two-way price, the bid and ask(offer). The bid is always lower than the ask price.
Bid is the price in which the dealer is willing to buy the base currency in exchange for the quote currency.
Ask(Offer) is the price in which the dealer will sell the base currency in exchange for the quote currency.
Spread is the difference between the bid and the ask price..
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