Currency trading The basic info
Are you familiar with the terms “currency trading?” If you have heard of it then good for you, but if you are not aware of its existence, then this article will provide you the basic information about the currency trading market.
Largest Financial market:
Currency trading and Forex (FX) trading are just the same. It is considered the largest form of the monetary markets. It is simply defined as the buying and selling of worldwide currencies through exchanging one currency value with another and this is with intent to get profits from it. Believe it or not, more than trillions of US currency are being traded daily.
Market Never sleeps:
More so, trades happen 24/7 without stopping. It is a rough market indeed because even the world economics plays a big role in the unpredictable actions of prices. The procedure of trading of currency is similar to other forms of markets, if you purchase a commodity at a low price, you can sell it at a higher value.
With FX (currency) trading, all transactions come in pairs. For instance, USD/EUR which means United States Dollars and Europe’s Euro. Few of the chief currencies that are subject to trading are EUR (Euro), CHF (Swiss Franc), JPY (Japanese Yen), and GBP (British pound), and all those currencies are paired against USD (United States Dollars).
Base / Quote Currency:
Since Forex is in pairs, the first one is referred as currency base whereas the second is considered as currency quote or currency counter. Hence, each quote is cited in conditions of the currency base.
Bid / Asking Price:
Moreover, two prices are given when asking for an FX quote, one is the price of the bid and the other is the asking price. The former price is what you acquire for the currency sold whereas the latter price is what you acquire for the currency purchased. If for example, the rate exchange of USD/GBP Forex pair is 0.629105152, this certainly shows that 1 United States Dollar is equal to 0.629105152British Pound.
Two Pairs Quotation:
As previously taken, all forex quotations have 2 pairs. For instance, when you asked for a quotation for Euro/US Dollar, you will be set a quotation such as Euro/US Dollars 1.4550/55. The 1.4550 (left part) is the value of the bid price, whilst the 1.4555 (right part) is the value of the Asking price.
In currency trading market, the fluctuation or rising and falling of rates is called by many as “pip or pips”. Pips are the so called least movement a forex quotation can have. Let us set as an illustration when the bid price of EUR/USD shifts to 1.4553 it means that the rate had shifted with 3 pips from that of 1.4550. The worth or value of pip varies depending what type of account which you are trading. Mini accounts are worth $1 while that of 100K account is worth $10.
Indeed, to be abreast with the concept of Forex or currency trading is important. After that, you can start to learn what are the benefits or drawbacks of trading currencies.