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The daily turnover of the Global
Forex market if taken together estimates at about 3 trillion US$. With this
huge turnover the Global Forex market is bigger than any stock market of the
world. There was a time when Forex trading was considered the forte of the
financial institutions and corporate banks but of late it has become popular
even with the retail investors. There are so many factors that have made Forex
investment a preferred investment medium for the retail investors. The higher
leverage, higher profit potential, round the clock trading hours – all these
factors have been instrumental in making Forex trading so wide popular all over
the world. As an investor if you want to get maximum profit from your
investment at the Forex market, you need to have a comprehensive idea about the
functioning of the Forex market. Here we are providing some insight into the
world of Forex trading that you need to know as a Forex trader.
How to read the Forex quotes?
There are so many currencies that
are traded at the Forex market but there are only seven currencies that are
most widely traded all over the world and these currencies are USD, EUR, GBP,
AUD, CAD, JPY and CHF. At the Forex market currencies are traded as a pair and
the Forex quote is presented in the form of spread. That means your Forex
broker offers you the price for buying and selling a currency pair. As a trader
if you accept the quoted price the trade is executed at the Forex market by the
broker. In the Forex quoted the symbols of the two currencies are presented
along with the bid price and the ask price for the currency pairs.
How currencies are traded at the Forex Market?
Each currency pair has two
different currencies. Among these two currencies one currency is called the
base currency and the other is called the price currency. Generally as a trader
you have to invest in the base currency and the value of the base currency will
be calculated in relation with the price currency. For example if you are
trading on EURUSD currency pair where the EUR is the base currency and the USD
is the price currency. You will be investing for specific volume of EUR, let us
say 1000 EUR. While buying you have to pay for the price of the 1000 EUR in
your currency and the price will be calculated in the USD. When you will be
closing the deal the valuation of 1000 EUR in USD will be the price. If the
value of EUR increases in respect to USD you get the profit and if the value of
the base currency decreases in relation to the price currency you will incur
loss in the trade. This is the most fundamental and basic form of Forex trading
and there are of course for many parameters and factors that come into play
during Forex trading.
How to trade in the Forex market?
Once you accept the quote offered
by your Forex broker, the trade is executed by the broker. This lets you trade
at the Forex market without attending the trading floor of the Forex market. It
makes it also possible to trade at the real time. In fact the online trading systems
that are provided by the Forex brokers lets you keep watch on the live and
streaming quotes of the currency pairs and then pick up the trades for
investment. Moreover you need not have to pay for any transaction fee or
brokerage for trading in the Forex market.
Ideal Forex trading strategy – Forex trading is done mostly as
margin trading and in Forex trading you will get high leverage. That means with
little deposits you can invest in huge valuation of currency pairs. This high
leverage lets you trade in the Forex market for greater profits while investing
comparatively small amount of money. In fact for some currency pairs that are
most widely traded, some brokers offer a leverage of 100 times. That means with
deposit of US$ 1000 you can trade for US$ 100,000. This is what makes it
possible to earn a fortune at the Forex market. But you need to determine the
optimum level of leverage that you can enjoy so that you gain most but loose as
little as possible when the market swings.
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