Forex Basics for Beginner Traders
Posted in Forex Basics for Beginners on 26. Mar, 2010
Since the invention of the internet, more and more people are entering into forex trading. It is so much convenient now with all the tools that are available to anyone. Lots of big banks and corporate companies have their hand in this huge market, it’s no wonder that it’s considered a very liquid market that is open every weekday 24 hours. What’s even more interesting is that $1.4 trillion exchange hands each day in the forex market.
There are so many currency pairs to choose from, which creates lots of options attracting different types of forex traders. Forex market can easily be affected by news that is related to the economy and country. Large swings in the market happen because of the news, and millionaires are made from this news. Many more have been made broke as well.
The forex trading game is a flexible market since you can make money no matter how the market condition is. You can make money when the currency is increasing or even falling. With the introduction of mini accounts from more and more brokers, anyone with money would be able to dip their hand into forex trading.
The minimum trade size amount on a standard account is 100,000 units. Since not everyone is able to afford such a huge trade, mini accounts enable any trader to buy in smaller lot sizes of 10,000 units.
The way forex trading works is that you buy a currency and then sell it in another currency. They are called currency pairs and there are a few major ones that have more traders trading them. Whenever the currency you purchased increases in price with the currency you are going to sell, you will gain a profit. The currency pairs are each known as the base currency and the counter currency.
There are 2 prices in forex quotes, which is a bid price and an ask price. With the bid price, you will be able to sell the base currency in exchange for the counter currency.
The ask price is where you can purchase the base currency in exchange for the counter currency. There will always be a gap between them prices which is called the spread.
Your broker will take their commissions by charging a certain amounts of pips from every trade you make. You have to take into account their commissions when calculating your profits.
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