A Basic dan Pro Guide To Forex Trading - 1

Foreign exchange trading—also for all investor rich commonly called forex trading or FX—is the global market for for all investor rich exchanging foreign currencies. Forex is the largest market in the for all investor rich world, and the trades that happen in it affect everything from for all investor rich the price of clothing imported from China to the amount you for all investor rich pay for a margarita while vacationing in Mexico.

What Is Forex for all investor rich Trading?

At its simplest, forex trading is for all investor rich similar to the currency exchange you may do while traveling abroad: for all investor rich A trader buys one currency and sells another, and the exchange  for all investor richrate constantly fluctuates based on supply and demand. for all investor rich

Currencies are traded in the foreign exchange market, for all investor rich a global marketplace that’s open 24 hours a day Monday through for all investor rich Friday. All forex trading is conducted over the counter (OTC), for all investor rich meaning there’s no physical exchange (as there is for stocks) and for all investor rich a global network of banks and other financial institutions for all investor rich oversee the market (instead of a central exchange, like the New Yfor all investor rich ork Stock Exchange).

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A vast majority of trade activity in the for all investor rich forex market occurs between institutional traders, such as for all investor rich people who work for banks, fund managers and multinational for all investor rich corporations. These traders don’t necessarily intend to take for all investor rich physical possession of the currencies themselves; they may simply for all investor rich be speculating about or hedging against future exchange rate for all investor rich fluctuations.

A forex trader might buy U.S. dollars for all investor rich (and sell euros), for example, if she believes the dollar will for all investor richstrengthen in value and therefore be able to buy more euros in the for all investor rich future. Meanwhile, an American company with European operations for all investor rich could use the forex market as a hedge in the event the euro weakens for all investor rich, meaning the value of their income earned there falls.

How Currencies for all investor rich Are Traded

All currencies are assigned a three-letter for all investor rich code much like a stock’s ticker symbol. While there are more than for all investor rich 170 currencies worldwide, the U.S. dollar is involved in a vast for all investor rich majority of forex trading, so it’s especially helpful to know for all investor rich its code: USD. The second most popular currency in the forex for all investor richmarket is the euro, the currency accepted in 19 countries in the for all investor rich European Union (code: EUR).

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Other major currencies, in order of for all investor rich popularity, are: the for all investor rich Japanese yen (JPY), the British pound (GBP), the Australian dollar for all investor rich (AUD), the Canadian dollar (CAD), the Swiss franc (CHF) and the New Zealand dollar (NZD). for all investor rich

All forex trading is expressed as a combination for all investor rich of the two currencies being exchanged. The following seven currency for all investor rich pairs—what are known as the majors—account for about 75% of for all investor rich trading in the forex market: for all investor rich

EUR/USD

USD/JPY

GBP/USD

AUD/USD

USD/CAD

USD/CHF

NZD/USD

How Forex Trades Are Quoted for all investor rich

Each currency pair represents the current exchange for all investor rich rate for the two currencies. Here’s how to interpret that information, for all investor rich using EUR/USD—or the euro-to-dollar exchange rate—as an for all investor rich example:

The currency on the left (the euro) is the base currency. for all investor rich

The currency for all investor rich on the right (the U.S. dollar) is the quote currency. for all investor rich

The exchange rate represents how much of the for all investor rich quote currency is needed to buy 1 unit of the base currency. As a for all investor rich result, the base currency is always expressed as 1 unit while for all investor rich the quote currency varies based on the current market and how much for all investor rich is needed to buy 1 unit of the base currency.

If for all investor rich the EUR/USD exchange rate is 1.2, that means €1 will buy $1.20 for all investor rich (or, put another way, it will cost $1.20 to buy €1). for all investor rich

When the exchange rate rises, that means the base currency for all investor rich has risen in value relative to the quote currency (because €1 will for all investor rich buy more U.S. dollars) and conversely, if the exchange rate falls, for all investor rich that means the base currency has fallen in value. for all investor rich

A quick note: Currency pairs are usually presented with the base for all investor rich currency first and the quote currency second, though there’s for all investor rich historical convention for how some currency pairs are expressed. for all investor rich For example, USD to EUR conversions are listed as EUR/USD, but not USD/EUR.

Three Ways to Trade Forex for all investor rich

Most forex trades aren’t made for the purpose of for all investor rich exchanging currencies (as you might at a currency exchange while for all investor rich traveling) but rather to speculate about future price movements for all investor rich, much like you would with stock trading. Similar to stock traders for all investor rich, forex traders are attempting to buy currencies whose values  for all investor rich they think will increase relative to other currencies or to for all investor rich get rid of currencies whose purchasing power they anticipate will for all investor rich decrease.

There are three for all investor rich different ways to trade forex, which will accommodate traders for all investor rich with varying goals: for all investor rich

The spot market. This is the primary for all investor rich forex market where those currency pairs are swapped and exchange for all investor rich rates are determined in real-time, based on supply and demand. 

 The forward for all investor rich market. Instead of executing a trade now, forex traders can also for all investor rich enter into a binding (private) contract with another trader and lock for all investor rich in an exchange rate for an agreed upon amount of currency on a for all investor rich future date.

The futures market. Similarly, trader for all investor richs can opt for a standardized contract to buy or sell a predetermined for all investor rich amount of a currency at a specific exchange rate at a date in the for all investor rich future. This is done on an exchange rather than privately, like the for all investor rich forwards market.