Quite simply, it’s the global market that allows one to trade two currencies against each other.
Because you’re not buying anything physical, forex trading can be confusing so we’ll use a simple (but imperfect) analogy to help explain.
Forex trading is the simultaneous buying of one currency and selling another.
The bulk of forex trading takes place on what’s called the “interbank market“.
Because forex is so awesome, traders came up with a number of different ways to invest or speculate in currencies.
Placing a trade in the foreign exchange market is simple.
Forex trading involves trying to predict which currency will rise or fall versus another currency.
Here is where we’re going to do a little math. Just a little bit.
Forex is commonly traded in specific amounts called lots, or basically the number of currency units you will buy or sell.
As in any new skill that you learn, you need to learn the lingo… especially if you wish to win your love’s heart.
An order is an offer sent using your broker’s trading platform to open or close a transaction if the instructions specified by you are satisfied.
You can open a demo account for FREE with most forex brokers. These “pretend” accounts have most of the capabilities of a “real” account.
Before we go any further, we are going to be 100% honest with you and tell you the following before you consider trading currencies
It’s time to learn about the different forex trading sessions.
For traders living in Murica (“America”), the trading day actually begins on Sunday night at 5:00 pm EST (10:00 pm GMT).
Just when Asian market participants are starting to close shop, their European counterparts are just beginning their day.
Right as European traders are getting back from their lunch breaks, the U.S. session begins at 8:00 am EST as traders start rolling into the office.
Quick pop quiz! What time of the day are TV ratings highest? If you said during prime time, then you would be correct!
So now we know that the London session is the busiest out of all the other sessions
For the sake of comparison, let us first examine a market that most folks are probably very familiar with: the stock market.
Now that you know the overall structure of the forex market, let’s delve in a little deeper to find out who exactly these people in the ladder are.
At the end of the World War II, the whole world was experiencing so much chaos that the major Western governments
There are many benefits and advantages of trading forex.
There are approximately 2,800+ stocks listed on the New York Stock exchange. Another 3,300+ are listed on the NASDAQ.
It’s not just the stock market. The forex market also boasts of a bunch of advantages over the futures market
The biggest appeal that forex trading offers is the ability to trade with margin.
In order to start trading forex, you need to open an account with a retail forex broker or CFD provider.
In your trading platform, you will see something that says “Unrealized P/L” or “Floating P/L”
When trading forex, you are only required to put up a small amount of capital to open and maintain a new position.
In order to understand what Used Margin is, we must first understand what Required Margin is.
The account equity or simply “Equity” represents the current value of your trading account.
Margin can be classified as either “used” or “free”.
The Margin Level is the percentage (%) value based on the amount of Equity versus Used Margin.
In forex trading, the Margin Call Level is when the Margin Level has reached a specific level or threshold.
The Stop Out Level is similar to the Margin Call Level, which was covered in the previous lesson, except that it’s much worse!
Let’s now take all the margin jargon you’ve learned from the previous lessons and apply them
Different retail forex brokers and CFD providers have different margin call policies
What happens if you open a trading account with just $100?
Each retail forex broker or CFD provider sets their own Margin Call Level and Stop Out Level.
What is the relationship between Margin and Leverage?
As you dive into the world of margin trading, it may feel like you have to learn an entirely new language to truly understand what’s going on.
Trading on margin is a way for traders with limited capital to make significant profits (or losses).
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