What Is Forex Trading?

forex-tradingForex trading is the most popular trading in today’s world. Because there is a belief that with little investment the profit will be more. This belief is the main reason for the loses traders are facing today. Everyone will be interested to earn more with little investment and they spend money on expert adviser, best indicator, top trading guide, top tips provider and finally they lose all their investment. This situation is rapidly increasing in today’s world. The reason behind this is trading without a fair knowledge about the market.

Think yourself will anyone sell their profit making software’s or indicator’s?. These will provide support for the trading And do not think their prediction will be correct. Always take a decision on your own while trading and use these as a support for your trading. The human brain is always better than a software. The best example of this will be Russian chess player Gary Kasparov. He defeated the IBM Super computer DEEP BLUE which will analyze two lakh moves in one second. So always think better and do the right things.

What is Forex ?

The simple sense of Forex (Foreign Exchange) is simultaneous purchase and sale of the currency or the exchange of one country’s currency for the one of another currency. The Forex market is a non-stop cash market where currencies of nations are traded , typically via brokers. Foreign currencies are constantly and simultaneously bought and sold across local and global markets. Foreign exchange market conditions can change at any time in response to real-time events.

The main reasons of currency dealing to private investors and attractions for short-term Forex trading are:

* 24-hour trading, 5 days a week with non-stop access to global Forex dealers.
* Easy to trade most currencies in volatile markets.
* Low margin requirements and many options for zero commission trading.

What is Leverage ?

Leverage is the ability to gear your account into a position greater than your total account margin. For example, if a trader has $1,000 of margin in his account and he opens a $1,00,000 position, he leverages his account by 100 times or 100:1. If he opens a $2,00,000 position with $1,000 of margin in his account, his leverage is 200 times or 200:1. Increasing your leverage magnifies both gains and losses. If he opens a $5,00,000 position with $1,000 of margin in his account, his leverage is 500 times or 500:1.

What is spread ?

Spread is different price between Bid and Ask. The difference between the buy quote and sell quote or the bid and offer price
For eg. if EUR/USD quotes read 1.3500/02, the spread is the difference between 1.3500 and 1.3502 , or 2 pips

What is Pip ?

Pip is a small amount on price movement. Exp: EUR/USD : 1.3000 change to 1.3001 so movement pip is 1 pip

What is Lot ?

Typically, one standard lot is equal to 1,00,000 units of the base currency, 10,000 units if it’s mini and 1,000 units if it’s a micro

What is Margin ?

Money that you need to use for open or maintain position. Amount of margin required is depend on how much you use lot to trade. Exp. Margin calculate :
EUR/USD : 1.3000 (market price)
Lot : 1.0 (standard lot, contract size 1,00,000)
Leverage : 5:100
So, 1.0(lot) * 1,00,000(contract size) * 1.3000(market price)/500(leverage) – 1.0 * 1,00,000 = 1,00,000 * 1.3000 = 1,30,000/500 = $260 margin use.

What is Take Profit ?

Take Profit is setting stop trading after we got a profit. Example : Buy EUR/USD position at price 1.3500 and price move up to 1.3550 and if set take profit at 1.3550, you already got 50 pips.

What is Stop Loss ?

Setting for stop trading if got loss. Example: Buy EUR/USD position at price 1.3500 and price move down to 1.3450 and if it set stop loss at 1.3450, you loss 50 pips.

What is Balance ?

Totals all your money deposit to your trading account.

Updated: January 22, 2014 — 7:51 am
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