Forex Trading

Introduction

Forex Trading Instrument

Forex Trading is an instrument for trading between two currencies quoted in pairs, based on current exchange rates that are very fluctuative over times a little as a few seconds. In short, Forex is a kind of high risk high return investment in currency trading. It was created in the 1970s, when international trade transitioned from fixed to floating exchange rates. The Forex market is now considered to be the largest financial market in the world because of its huge turnover.

All currencies are traded in pairs and each currency has an official abbreviation (for example, GBP for British pound, USD for US dollar, JPY for Japanese yen, etc).

The "base" currency is the first currency in the pair. The "counter" currency, is the second currency in the pair.

The abbreviation indicates the amount you have to spent in USD(Counter Currency) to obtain every 1 EUR (Base Currency). It is shown in quotes, for example : EUR/USD 1,3089. The minimum rate fluctuation is called a point or a pip.

On Forex Trading the currencies are quoted in pairs as Bid Price and Ask Price.

BID

Bid

Price Rate at which we can sell the base currency and buy the counter currency.
ASK

Ask

Price Rate at which we can buy the base currency and sell the counter currency.
USD
EUR
GBP
CHF
AUD
JPY
NZD
CAD

Long and Short

Are expressions used to describe the direction of a trade. After taking the offer, the speculator is buying a currency pair and will be considered to be long. By selling USDJPY on the bid, he is effectively short.

Going short on a currency pair expresses the view that the first named currency should lose value relative to the 2nd named currency. The seller is expecting a price drop, whereas the buyer or holder of a long position expects prices to rise.

Long Short