Actually the so-called "forex trading" that is the same trading activities such as trading in General, just that trading involves the exchange of two currencies of different types of foreign currencies. For example, you buy United Kingdom pounds sterling (using dollars that You have), then the ratio of the Pound/dollar rise, you're selling Pounds and buying Dollars again. At the end of trading you will have more dollars than before you trade.
World currency has always been on the exchange rate floating (uncertain or capricious), where they are always traded in pairs. These currencies in forex is known in the "symbols" or abbreviation that consists of two parts; one for the first currency, and another for the second currency. For example, the symbol is USDJPY stands for Us dollars (USD) and Japan Yen (JPY). Just like stocks, in forex you can apply the tools of technical analysis on forex charts. Analysis of traders can be optimized with "symbol" forex, which helps you find a profitable strategy.
If you think one currency (called with the second currency) will be valued against other currencies, then you can exchange the currency with the intended currency (first currency called), and can make "deals" in it. If all goes according to plan, in the end, you will be able to conduct transactions otherwise, i.e. swap (sell/buy) the currency of the first killings of the other, and gain from the transaction. As a side note, in forex trading there is no dividends are paid on currencies as it did in the stock market, so the benefit is generally only gain obtained from the difference between buy and sell prices.
Transactions On The Forex Market
Formerly, most forex trading limited to large banks and institutional traders only. However, advances in technology have made the small traders can also profit from the many benefits of forex trading just by using the internet or trading online. At the moment, the foreign exchange market brokers are able to break down the size between a large bank unit becomes smaller. Thus, small traders, like you and I, can get an opportunity to join in elections caused profit in the forex market.
Online transactions on the forex market are performed by dealers at major banks or known by the term ' Broker '. Banks, primary dealers, dealer-and sometimes also speculators-the large speculators are the main players in the trade. They are the parties that are able to take advantage of the liquidity of the currency market is remarkable. The Forex market has the liquidity that is higher than the stock market as more money is traded. Forex spread among banks that exist around the world, and this means transactions occurred during 24 hours. Dealer-dealer that is in the main institutions also worked for 24 hours/7 days. When you're sleeping comfortably in bed, the dealers in Europe could be thus were memperdagangan of currency with colleagues in Japan.
In fact, the forex market never stops, even in the event of a bomb incident in America, on September 11, 2011, you can still make transactions as usual. The currency market is the largest and oldest financial market in the world. This market is also called the foreign exchange market (foreign exchange market) or can be shortened to foreign exchange market (FX market). Forex is also the most liquid market in the world. Price movements in the forex market are very smooth and without any gap (gap) as a commonly encountered by traders in the stock market. The clients may place take-profit and stop-loss orders at broker for executed automatically when the movement arrived at the price have been determined.
Also, unlike stocks, Forex trading is done with a high leverage, such as 1:100. This means that with an investment of $ 1000, you can control $ 100,000, and increase the potential benefits. Some brokers also provide so-called micro and mini accounts, where you can deposit a minimum of less than or around $ 100. Of course this makes it easy for anyone who wants to join the trading.
Examples Of Forex Transactions
Let's say, you currently have a trading account for $ 25.000 and you trade with a 1% margin requirements. The current quote for the EUR/USD for example 1.3225/28 and you place your order to buy 1 lot 100,000 Euro at 1.3228, in the hope the Euro will rise against the dollar.
At the same time, you place a stop-loss order at 1.3178 representing losses up to 2% of the account's equity if trading opposite to you. The stop loss level is 50 pips below the price order, and take profit is at 1.3378, i.e. 150 pips above the order price.
Thus, you risked 50 pips to get 150 pips. The advantage that you can get is three times greater than the losses incurred. If this is workable with consistent, then it can help you to get a greater percentage of profit from the losses.
How about marginnya? The trading value was $ 132,280 (100,000 * 1,3228). Then the required margin deposit of 1% of the total, amounting to $ 1322.80 ($ 132.280 * 0.01).
For example, as then your expectations, the Euro strengthened against the dollar and a limit order has been on 1.3378 then the position will be closed. Thus, the total profit in this trade for $ 1500, assuming each pip is worth $ 10.
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