The Forex market is the biggest and most liquid market around the world, every day there are currencies exchanged surpassing 5 trillion dollars worth. Forex is an arena where all businesses, banks, investors, traders and governments connect in order to buy and sell currencies. Around 14% of this exchange volume is carried by governments and corporations that trade services and goods overseas.
What do we trade?
The Forex industry is available 24 hours, 5 days a week. When we deal Forex, we exchange currencies. Traders could either sell them or buy them. The primary currencies with the largest exchange volume are Euro, US dollar, Swiss franc, Japanese yen and British pound. In nearly 89% of all Forex trades, the US dollar takes on a major role. When you look at currency pairs, the most common traded pairs is EUR/USD.
Trading currency pairs with leverage
In a scenario that you invest the most traded currency pair – “EUR/USD”. And you believe that the EUR may perform better for a particular reason in the future than the USD. As an investor you will pay out to your brokerage a margin (for instance 200 USD) and in exchange for that you will be supplied with a leverage to invest with a bigger amount of capital than you have on your account (for instance 25x times as much).
Base and quote currency
EUR/USD – left currency (euro) is referred as the base currency. While the dollar is in this example the “quote currency”. The very first currency shows us the number of units we receive in trade for the 2nd currency. In other words, the total amount of units of the other (quote) currency is required to purchase the base currency. For instance, if the cost (exchange price) of currency pair EUR/USD is 1.4290, it implies that we receive 1 euro for $1.4290.
How much can I earn by trading Forex?
We don’t have the right answer to this question truthfully because example from one investment that you may invest 100 USD you could potentially profit an additional 150 USD, but you could also suffer lost of the entire investment or perhaps more if you do not setup a stop-loss. It is not really very clear in advance, how the investment goes so we can not tell you accurate earnings.
How can I adjust the risk of my trades?
This could be carried out by utilizing risk management resources. Investors could arrange the automatic closing of their investments when the currency gets to a particular cost (in loss = stop loss, or in profit = take profit) or traders could attempt to monitor the deal and manually stop it. Both take profit and stop loss are extremely essential instruments which traders should look into.
The Difference between Forex and CFD
The distinction between Forex and CFD is quite often misinterpreted even tho it is pretty obvious to understand. With CFD investors could trade commodities, shares, indices, ETFs, options and Forex. Indeed, that is suitable also for Forex trading. Which implies that there is no big difference between them, as Forex goes under the CFD category. Forex and CFD trading is very common around the world.
Where to trade Forex and CFDs
Investors could begin Forex and CFD trading on either their smart device on their computer. Suitable web-based platform or software will be offered to you by the online trading broker free of charge. Traders could pick from numerous different brokers, where they could trade both Forex and CFD, the highest rated broker is currently IQ Option. This popular broker has an excellent reputation among investors, and is overseen by regulators.