Though forex trading (the exchange of foreign currencies) may seem complicated, the truth is that most people can get started with a new account in as little as a single afternoon.
You need to understand the purpose of Forex in order to succeed in forex trading. Forex trading is all about trading of online currency. The key to success in Forex trading is to buy low and sell high just as with any other market. As a Forex trader, your task is to try and determine the trend of the specific currency which you are looking to either buy or sell and make use of the best possible forex trading strategies to ensure that a profit is made.
Now as you know the purpose of Forex trading, the very next step in knowing all about Forex is to understand the codes, definitions and numbers used when trading. Three-letter codes are used to assign all currencies that are used in Forex trading, for example, the US Dollar is written as USD and Euro are represented as EUR.
Cross is a 6 letter word. It is a combination of letter codes of currencies in which the more expensive currency comes first. Let’s understand with an example, GBPUSD represents the no. of US Dollars you will need to pay for one British pound. These rates are shown up to five-digit numbers, for example, GPBUSD = 1.5432 which means that 1 British pound is worth 1.5432 US dollars. Change is displayed in bold when the rate changes, eg GPBUSD = 1.5434 which will mean that the rate has moved by 2 points. Knowing this is the basics and key to successful Forex trading.
Ask & Bid Price:
You enter in the forex trading market either as a buyer or a seller of a particular currency. Your price is known as the ASK price if you are a seller and if you are a buyer then your price is known as the BID. Currency can only be bought from a seller with an asking price which is the same as the BID price.
These are some points to note for beginners when it comes to forex trading. Knowing what is the purpose of trading forex is and knowing all about forex before you enter into the market can be a big game-changer and can make a big difference when it comes to your profits.