Forex trading on the foreign exchange (forex) is fairly easy today with three types of accounts is intended for private investors: Standard batch, micro mini lots and lots. Beginners can start with a micro account for as little as $ 50th
Before you start jumping on you should familiarize yourself with the terminology market and foreign exchange market, and if it has been trading stocks online should be easy to start.
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Below is a list of terms for learning shown.
PIP: The smallest price change that a given exchange rate can make. Since most major currency pairs are priced to four decimal places, the smallest change is that in the last decimal. A common exception is for few Japanese yen (JPY) is quoted to two decimal points.
Base Currency: The first currency quoted in a currency exchange. Typically, it is also considered as the national currency or currency of accounting.
Crossed currency pairs: A pair of currency traded currencies that does not involve the US dollar. A foreign currency is traded for another without having to first change the currencies of US dollars.
PAR OF EXCHANGE: The structure of pricing and pricing of currencies traded in the currency market: the value of a currency is determined by its relation to another currency. The first currency in a currency pair is called the “base currency” and the second currency is called the “quote currency”. The currency pair shows how much of the quote currency is needed to buy one unit of the base currency.
QUOTE CURRENCY: The second currency quoted in a currency exchange. In a direct quote, the quote currency is the currency. In an indirect quote, the quote currency is the national currency. This is also known as the “second currency” or “counter value”.
Now that you have reviewed the basic terminology, let’s look at some of the differences between trading stocks vs. currencies. In currency trading always compare one currency to another, so Forex always quoted in pairs. Sometimes authors currency research covers only half of the currency pair. For example, if an article referring to the euro (EUR) traded at 1.3332 assumed that the currency is the US dollar (USD).
When you look at the screen trade for the first time can seem confusing at first, but it’s actually very simple. An example of EUR / USD appears.
The example of the quote shows merchants how much a euro in US dollars). The first currency in a currency pair is the “base currency” and the second is the “counter currency” or the secondary currency.
When you buy or sell a currency pair is action being made in the base currency.
For example bearish euro could resellers sell EUR / USD. Now, when you sell EUR / USD, the trader is not only selling the euro, but also to buy dollars at the same time. Thus, trade in pairs.
Let’s say you sell EUR / USD at 1.4022. If EUR / USD falls, does the euro weakened and the dollar is strengthening. You may also have noticed that the price of the quote has four places to the right of the decimal point. The currencies are quoted in pips. A pip is the unit in which the results account. Most currency pairs, except the Japanese yen pairs are quoted to four decimal places. This fourth point after the comma (in a 100 of a cent) is typically what traders look to tell “cores”.
Each point that instead of price growth is a pip movement. For example, if GBP / USD rises from 1.5022 to 1.5027, GBP / USD is up 5 pips.
Now, depending on the lot size (standard, mini, micro), the dollar value of a pip vary according to the size of their trade and the currency you are trading.
The most common lot size trades in increments of 10,000 (Mini). A lot size of 10,000 EUR / USD worth $ 1.00 per batch. If you were trading 3 lots or 30,000, each pip is worth $ 3 in the income statement. A full party, or standard lot size is 100,000 each pip is worth $ 10 and a micro lot size is 1000, each pip is worth $ 0.10.
Some currency pairs have different pip values. Be sure to check with your agent.
One of the good things about currency trading is that there is no commission. Noting the image of the previous quote, notice the small number of cores between the two currencies quoted, the difference in prices is 2.5.
This is known as spread. The spread is how the broker makes his money and work the same way as the bid / ask in stock trading. Not all are created equal spreads. Spreads vary between brokers and even the time of day can make volume is light and spreads to rise in some corridors.