New To Forex? Start here!

Classroom

Forex investors trade currency pairs. A currency pair is the exchange rate of one currency over another. Popular major currency pairs include USD/CAD, EUR/USD, GBP/USD, USD/JPY

The first currency of each currency pair, for example EUR/USD, is referred to as the base currency and the second is called the quote currency. All currency pairs are quoted with a bid and ask price.

The term pip is frequently used in Forex trading and refers to the smallest movement a currency pair can make. PIP stands for Price Interest Point. So, for example a move in EUR/USD from 1.2109 to 1.2129 is equal to a 20 pip move.

The Forex market has over 2 trillion USD in liquidity each day. With this massive amount of buyers and sellers exchanging currency each day, daytraders have discovered a niche whereby they open and close positions for profit in as short a period of time as minutes or even a few seconds. This type of trading is very different then the standard buy and hold mantra we often hear from the stock trading realm.

One of the attractive features of Forex trading is the leverage that is available from brokers. With the newly introduced regulations, brokers are limited to a maximum 50:1 leverage on major currency pairs and 20:1 leverage on minor pairs. This is in stark contrast to a regular stock exchange that only offers 1:1 margin, or equity trading which has 2:1 margin. Like any tool, there are positives and negatives. Being too highly leveraged is a double-edged sword. If the trade goes against you, you could receive a margin call if you’re too highly leveraged. If the trade goes in your favor then your profits are magnified greatly.

Learning to trade the Forex market can be highly profitable. Like any acquired skill, it takes, time, practice and experience. Join our chat channel to learn more about how to read charts, understand price action, and become a consistently profitable trader.

Ken

Both comments and pings are currently closed.

Comments are closed.