What You Need to Know About Forex Trading as a Beginner
Today, trading currency through foreign exchange or forex is relatively easy with the three types of accounts which are designed for retail investors, including standard lot, mini lots, and micro lots. Currencies should be exchanged for facilitating international trade and international business. For instance, if a U.S. citizen wants to buy something in Japan, he needs to have his dollars exchanged into yen so he can do business transactions in Tokyo. The most liquid market in the world if Forex, with trades running up to two thousand billion US dollars, and all transactions are done online via computer, for 24 hours a day in different time zones. As a beginner, you can start with forex for as little as $50 with a micro account. If you are a beginner to the foreign exchange market, you need to learn and familiarise yourself with the different market and terminologies involved in the forex market, and it will be a lot easier if you have already tried trading stocks online.
You have to know and understand the basic terms in the foreign exchange or forex market, including PIP, base currency, currency pair, cross currency pair, and quote currency. Thesmallest value change that a currency pair or exchange rate can make is referred to as PIP (acronym for Percentage in Point or Price Interest Point. Depending on your lot size, the value of the pips varies, and the difference in pips between the bid and ask is referred to as the spread. Since forex brokers do not collect an official commission, they make money through the spread. When trading, a positive pip means your trade is earning, while a negative pip indicates that your trade is not in good shape. The base currency is the first currency quoted in a forex currency pair, which is considered an accounting currency or domestic currency. The cross currency pair is any pair of foreign currencies but not including US dollars. The currency pair refers to the pricing structure and quotation of the currencies traded in forex, wherein the value of a currency is highly determined by its comparison to another currency.
Keep in mind that you are actually buying and selling in a foreign exchange in a currency pair, and the action is performed on the base currency. For example, when selling EUR/USD, the trader is selling euros and buying US dollars (pair trade). A basic foreign exchange trade is when GPB/USD rises from 1.5023 to 1.529, the GBP/USD has risen 6 pips which is in positive pips, and that means your trade is earning. For more info about forex and ho to trade effectively, feel free to check our website or homepage now!