Basics of Currency Trading Made Easy – How Forex Trading Can Earn You Big Returns
The basics of currency trading isn’t hard to learn. This information will be helpful for you learn the forex market as you begin your career in trading. Forex or foreign exchange means the buying and selling of currency. The individual who buys and sells currencies is called a forex trader.
Another item that you should know in basics currency trading is the foreign exchange market. It is the largest market in the world. Trading happens here day in and day out. It functions 24 hours a day 5 days a week, except on holidays and weekends. The week starts at five in the afternoon Sunday Eastern Standard time until four in the afternoon Eastern Standard Time Friday.
Basics currency trading is really simple. The aim of the trader is to purchase something that is about to increase in value, then sells it at a higher price later to earn profit. Another way is to sell at a high price or rate now and buy it lower at later day. The two currencies that make up an exchange rate are referred to as currency pair. Here is a list of the currency codes used in the foreign exchange market:
USD = US Dollar
EUR = Euro
JPY = Japanese Yen
GBP = British Pound
CHF = Swiss Franc
CAD = Canadian Dollar
AUD = Australian Dollar
NZD = New Zealand Dollar
Most traded currency pair
EUR/USD = “Euro”
USD/JPY = “Dollar Yen”
GBP/USD = “Cable” or “Sterling”
USD/CHF = “Swiss”
USD/CAD = “Dollar Canada”
AUD/USD = “Aussie Dollar”
NZD/USD = “Kiwi”
The base currency is the one in the left while the one on the right side is call the counter currency. The exchange rate tells you how much you need to pay based on the counter currency to purchase one unit of the base currency.
There are terms in basics currency trading that you will see as you engage in forex trading. Here are some of the common terms and acronyms to keep in mind on basics currency trading.
Pip is the slow movement of a currency pair can make. It means price interest point.
Leverage is a margin deposit and the rest will be coming from your broker.
FCM means Future Commission Merchant or someone who is licensed by the U.S. Commodities Futures Trading Commission or CFTC to deal in future products and accepts monies from clients to trade them.
A dealing desk provides pricing, liquidity and execution of trades.
NDD or No Dealing Desk uses external liquidity providers to provide pricing and liquidity for its clients.
Spread is the difference between the sell and the buy quote.
There is much to learn and you must invest time in studying the forex trading market. You will need the knowledge as you engage yourself in transactions. It is always best to start with basics currency trading.