Forex Trading Basics

Trading in the forex market can get really confusing especially for those who are just beginning. People are often discouraged to trade when they don’t know where to start, when the obvious way to start trading is learning the basics of forex trading. For this matter nothing can beat ECN Broker Review.

Forex stands for “Foreign Exchange” which means that foreign currencies are being traded by top International Broker. The forex market is the largest market in the world and continues to grow annually. It has a turnover of around $5.3 trillion per day.

You may not notice, but when you travel overseas and exchange your money into a foreign currency, you are already participating in the forex market. The forex rate between two currencies is based on supply and demand. This will determine how many you’ll get from your money for your choice of foreign currency.

The goal in forex trading is really simple. You buy a currency at one price and sell it higher price in order to make a profit. If you think a currency will increase in value, you can buy it. If you think it will decrease, then you can sell it.

All forex trading is done in pairs. Unlike the stock market, where you can buy or sell a single stock, you have to buy one currency and sell another currency. The reason for this is because you’re betting on the value of a currency against another.

Let’s take a look at EUR/USD as an example. EUR is the base currency, and USD is the counter. A price quoted shows how much one euro is worth in US dollars. Typically, there are two separate prices that are shown. The first one is the buy price, and the other one is the sell. The difference between the two prices is the spread.

If the EUR/USD buy price is 0.70644 and the sell price is 0.70640, then the spread is 0.4 pips. A pip or percentage point is the smallest increment of trade. One pip usually equals 1/100 of 1%.

The forex market doesn not have the same opening and closing times as the stock market. You can trade currencies 5 days a week, 24 hours a day from Monday morning when the Australian financial markets open, until Friday night when the American market closes.

To make it easier, there are four sessions throughout the day when trading in the forex market. The Australian trading session, the Asian trading session, European trading session, and the American trading session.

Essentially, individual currencies move most during their ‘own’ trading time. USD/JPY moves most during the American and the Asian session. The AUD/USD moves most during the Australian and the American session. Overall, the overlap between the European and American session is the most active trading session.

Don’t forget, if you’re thinking of trading in the forex market, hire a broker that would help you with your trades. Though you can trade without a broker, it’s more ideal to trade with a broker to get the advantage of their online platform that can serve you in your trading journey.