What You Need to Know About Forex Trading as a Beginner
Nowadays, trading currency in the foreign exchange market or forex is relatively easy with three account types specifically designed for retail investors, including the micro lots, mini lots, and standard lot. “Forex” is the short term for foreign exchange market, wherein currencies need to be exchanged in order to facilitate international trade and foreign 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. It has been said that the most liquid in the market globally is Forex. First-time investors can get started with a micro account for only $50. If you are a first-timer, you need to equip yourself with the right knowledge about the forex market, and it will be a lot easier if you have been 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. The acronym PIP refers to Percentage in Point or Price Interest Point which is the smallest value of change in currency pair in the foreign exchange market. 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. Your broker makes money on the spread because they don’t collect an official commission. Remeber that when you trade is positive in pips, then you are making a profit, but if it is negative, your trade is under water. A base currency is considered as an accounting currency or domestic currency, which is the first currency quoted in a forex currency pair. When it comes to cross currency pair, this is a pair of currencies traded in foreign exchange excluding US dollars. Currency pair includes the base currency and the quote currency, which is the pricing structure and quotation of the currencies traded in forex, and the currency value is highly determined by its comparison to another currency.
Always remember that when you’re engaged in forex, you are actually buying and selling currencies, and the action is being 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. Allow us to share more valuable information about forex by visiting our homepage or website today so you can learn the art and skills of foreign exchange trade for a more successful transaction every time!