Forex Trading appears to be a complicated activity at the first look. Any Trading/Trade involves Buy/Sell activities. Only difference being in what you sell or buy. So what do we sell or buy in Forex Trading? It is international currency. It involves buying and selling of currency pair.
It involves exchange of currencies and it happens in big scale because multi national companies are investing in nations across the globe. So it becomes inevitable to exchange currency in order to make Global investments to happen. we can buy/sell currency at the market price.
When you place an order you buy one currency and sell another. This becomes a Currency pair. Say,when you buy EUR/USD (Currency pair involving EUROS and US Dollar) you are selling US Dollars to buy Euros. When you sell EUR/USD you are selling Euros to buy US Dollars.
In simple terms you make profit when you sell currency at a price higher than the price at which you bought it. The exchange rate between two countries' currencies is important in Forex Trading and in turn exchange rate depends on the supply/demand for a particular currency in the International market. When the demand exceeds supply the value of the currency goes up and when the supply exceeds demand the value of the currency goes down.
How to do Forex Trading?
There are many Forex trading agencies available online where in you can open an account and do Forex Trading.
Common terminologies used in Forex trading.
Currency Pair
Example: EUR/USD - In this Euro is the BASE CURRENCY and US Dollar is the COUNTER CURRENCY. Price of EUR/USD will indicate the number of units of counter currency required to buy one unit of base currency.
Forex
Forex means Foreign Exchange( Exchange of one currency for another).
Limit Order
It is an order to execute a trade when the price of the order changes to the advantage of the trader.
PIP
'Percentage in Point' refers to the very last digit of a currency price. Forex quotes are in 4 decimal places(.0001). Price movements happen in units of.0001.
Risk Management Tips
1.Understand the Risk involved by making an online research.
2.Start with small Investment.
3.Open account with a reliable broker to avoid any trading mishaps.
4.A professional approach is required and don't take any emotional decisions.
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