Learn Forex with Best Forex Trader: Foreign exchange is the process of exchanging one currency into another for several reasons, usually for commerce, trading, or tourism.
The word FOREX is portmanteau of “FOReign EXchange. It is a world’s largest decentralised over-the-counter market with trillions of dollars changing hands every day.
It is the marketplace where various national currencies are traded. There is no centralized location, rather the forex market is an electronic network of banks, brokers, institutions, and individual traders.Unlike other financial markets, Forex is active 24*7. It is a major financial center where banks, dealers, hedge funds, corporations, individual investors and speculators are trading currencies to gain high profits.
This cumulative buying and selling of currency causes the value of your Forex investment to move either up or down.
There are numerous factors that result in fluctuation of invested exchange rate:
-A country’s political, social and fundamental economic environment and their central banks fiscal policy, interest rate adjustment are some of the common factors.
Getting familiar with Forex:
To have a wider and thorough perspective about how the currency exchange rate can affect the value of your Forex investment this is what you need to be familiar with:
All currencies are traded in pairs and each currency has its own specific symbol. Like for Euro dollar- it is EUR, Japanese Yen – it is JPY, for the Pounds Sterling – it is GBP, and for the Swiss Franc – it is CHF. Hence, EUR/USD would be Euro-Dollar pair. Similarly, GBP/USD would be pounds Sterling-Dollar pair and so will be USD/CHF as Dollar-Swiss Franc pair and so on and so forth.
You will always notice that USD quoted first with few exceptions such as Pounds Sterling, Euro Dollar, Australia Dollar (AUD) and New Zealand Dollar (NZD). The first currency quoted is called the base currency. This is not surprising as the U.S. dollar is regarded as central currency of the Forex market and is involved in nearly 90% of all Forex transactions.
So how are these currency pairs quoted on the Forex market? You will see two numbers on all Forex quotes. The first number is known as the “bid” and the second is called as the “offer” (or the “Ask”) price. Take for instance EURUSD, you will see 1 /1.4570. The first quote of 1 is the “bid price”, the price where traders are prepared to buy Euro against the USD Dollar. The second number 1.4570 is the “offer or ask price” and it is the price traders are prepared to sell the Euro against the US Dollar. You will notice that there is a difference between the bid and the offer price. This difference is known as the “spread”. Based on the previous EUR/USD quote, you know that 1 Euro is equal 1.5470 US dollar.
The way profit is measured of a currency is by “pips” or point. PIP is the acronym for price interest point. If the EUR/USD moves from 1.4625 to 1.4655 that is 50 pips. A pip or 0.001 is the last decimal place of a currency quotation with the exception of the Japanese Yen and Yen cross rates. A price movement for the USD/JPY from 121.10 to 121.60 will be 50 pips.
The prime objective for all Forex Traders is to make profit through foreign currency movements. The benifits of trading Forex are innumerable and the amount of money you can earn through exchange can be life changing and ultimately leads you to achieve financial freedom. This requires practical understanding and training in Forex education. This education may include understanding technical analysis, chart pattern and formation, trade management such as stop loss and profit target and money management. So by one time prudent investment on learning intricate technicalities regarding Forex, you can forever enjoy long term currency trading success.