Forex trading involves significant risk, and learning takes time. This course will get you started and give you a better understanding of the fundamentals of currency trading. Our educational material will guide you through the jungle of pips, lots and chart patterns and aspires to introduce you to the markets. Our main purpose is to hasten the learning process by supplying you the most useful information in the simplest manner possible.
Forex trading is a form of commodity trading. In the commodity market traders buy and sell assets like oil or gold in exchange for currencies. In the forex currency trading market the assets bought and sold are currencies themselves.
For example, when the currency trader buys an ounce of gold, he must pay for it with the US dollar, which creates a quote in which the price of the metal is defined in terms of a currency which is another asset class.
But when the forex trader buys or sells the Euro, he must pay for it with another currency Australian dollar, Swiss Franc, etc in which case the quote created has the same asset class on both sides.
The result of this is that it is impossible to speak of absolute value in the forex market because it is possible to value the Euro in dollars, Francs, or Yen, each being a valid choice as a value indicator.
In the case of stocks, or commodities, the value can only be indicated in USD; therefore it is possible to speak of an absolute value. Upon downloading and opening the software of your chosen forex broker, the first concept that you will encounter is the forex price quote. The quote is simply the record of a previous transaction in which a currency pair changed hands.
When two financial actors exchange currencies, the price at which the transaction occurred is called a quote. In the above quote, the currency on the left side is the currency which was bought by us, while the one on the right is the one that we sold to finance our purchase. The number signifies the value at which the currencies were exchanged.
Or to put it in a short and simple mathematical form, when we bought 1 Euro, the value of one Euro was equal to 1. Upon executing the trade, we are now long the Euro, and short the dollar we bought the Euro, and sold the dollar. The principle of profit in currency trading is the same as in all other kinds of trading activity: Consequently, we will wait for the value of the Euro to rise above 1. Since our base currency is the dollar, our profit will also be measured in dollars.
We wait until the quote is at 1. Since our initial trade was worth 1, USD, the difference between 1, and 1,, that is, 30 dollars, becomes our profit. Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. No information or opinion contained on this site should be taken as a solicitation or offer to buy or sell any currency, equity or other financial instruments or services.
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