How many times have you. . . Pulled your hair in frustration, for not understanding the complex world of currency trading?
Finally a solution!
Currency trading or FX trading can be a real pain in the #&% to understand. The world of currency trading is very hard to learn, You probably know this by now.
In this currency trading made easy article you will learn some of the most important pillars of currency trading. The content is written in easy to understand sentences, so even a complete beginner can understand what currency trading is all about.
What is Currency Trading/Forex?
Currency trading also known as Forex(Foreign exchange) or FX is the buying and selling of countries currencies. The forex market has grown to be the largest market in the world. In one day of forex trading the turnover is $1,9 trillion.
In comparison: The total economy of the United States of America in 2006 was $13 trillion. This means that one week of forex trading makes up for a whole year of the US economy.
In forex trading the most common currencies to be traded is the US Dollar, the British Pound, the Euro, the Japanese Yen, the Swiss Franc, the Canadian Dollar and the Australian Dollar.
You dont just trade one currency in forex trading but two. This is called a currency pair. For example the Euro/US Dollar (EUR/USD) or the Euro/British Pound (EUR/GBP).
This way it becomes special because you need to focus on both of the currencies and how they react to each other. Not just one currency.
The forex market has no physical location. Its a global electronic network of banks, corporations and individual traders.
The FX market never rests. Its a 24 hours a day market. You need to be alert!
What is currency price?
The price on a countries currency changes depending on that countries international trades and investments. The forex market is also affected by political and economic movements of a country. For example political instability, interest rates and a countries inflation.
A price of a countries currency or normally called “quotes" is divided into a bid price and an asking price.
The bid price: A price which the dealer is willing to BUY at and the price a trader(you) can SELL at.
The ask price: A price which the dealer is willing to SELL at and the price a trader(you) can BUY at.
The difference between the bid and the ask price is called the “spread"
The spread is counted in “pips". A “pip" is normally 0.0001 of an exchange rate. Lets say the Euro versus the Dollar trades at bid price 1.3415 and ask price 1.3420. The last decimal is called a pip. The spread in this example is 5 pips.
The spread is a way for your broker to collect payment from the transaction you made. For example: Lets take the example from above. Lets say you buy the EUR/USD at the ask price
1.3420. The EUR/USD needs to move in your favor for 5 pips so you can sell at 1.3420.
So you see how the currency trading system works with a global network of banks and corporations. In this article you learned two of the important pillars you need to know:
What is currency trading and what is currency price. But there are more pillars you need to know.
In my next article i will discuss the two types of traders that exists. The Technical and the Fundamental.
Until then. . read more about forex and how currencies react to each other.
I know how hard it can be to understand forex. I know because i have been in your shoes too. You can learn forex if you try hard.
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