How To Trade ForexSTEP 1:
The step 1 defines certain concepts and terms of Forex Trading-
Quotes are a vital part of the foreign exchange trading, as Forex trading is
done in terms of quotes. Therefore, comprehending these quotes is the first
important step.
Firstly, in a Forex quote, the currency listed first is known as the Base
currency. For example, we have EUR/USD. Here, EUR is the Base currency.
Secondly, the base currency has always the value 1. In other words, the rate of
other currency is calculated against 1 pt of the Base currency. For example, we
have EUR/USD where EUR is the Base currency. Then 1 EUR = 1.2323 USD or the
value of one currency against the other in the pair.
Thirdly, when dealing in terms of quotes, prices are expressed in terms of Pips.
Pips can be defined as “percentage in points” and are mostly the fourth decimal
point i.e. 1/100th of 1%.
Also used while trading through quotes, are two significant terms known as Bid
and Ask. These two terms are responsible for making trading quote, a two-sided
quote.
Bid can be defined as ''The price at which the base currency is sold
concurrently buying the counter currency. Ask can be defined as “The price at
which the base currency can be bought concurrently selling the counter
currency''
STEP 2:
Step 2 illustrates the other key features of Forex trading which are namely, the
leverage and the Margin. These two are immensely important in attracting the
interest of the traders as they enhance the trading power of the investors.
The leverage is the ratio of the deposited amount to the amount that can be
traded. Leverage enables the investors to deposit a small amount of money but
still trade for a much larger amount. This way, investors can trade easily,
utilizing less money to deal.
Margin, therefore, is the minimum amount required to be deposited before an
investor starts trading. This can also be known as the initial amount with which
the Forex trading account can be opened.
A detailed Example below illustrates exactly how Forex trading is done-
Supposing the current bid/ask price for EUR/USD is going by the rate of
1.5027/30, giving you the option to buy 1 euro with 1.5030 US dollars or sell 1
Euro for 1.5027 US dollars. Now, if you feel that the Euro is underrated against
the US dollar, you would opt on buying Euros, selling your dollars at the same
time. So you buy 100,000 euros by paying 150,300 dollars. You can then start
analyzing the market, waiting for the exchange rates to rise.
As predicted, the rates begin to rise and then you decide a favorable rate at
which you plan to sell your Euros to get a hefty profit. Supposing the Euro
rises to 1.5090/93. Now, to realize your profits, you sell 100,000 euros at the
current rate of 1.5090, and receive $150,900.
You bought 100k Euros at 1.5030, paying $150,300. You sold 100k Euros at 1.5090,
receiving $150900. That's a difference of $600 or in other words, you
successfully earned a profit of $600.
Return on Investment = $600
Always learn a lesson from the Forex Indicators, keep a watch, think long term
and then take a step.
STEP 3:
EasyForex does e-trading using high end EasyForex softwares. Easily
accessible and user friendly, they have a simple operating process. For
instance, the currency pair to be bought or sold can simply be dealt with, by
clicking on the sell or the buy key, placed in front of that currency.
After the deal to be done is selected, a quote is then displayed by the
software, making it easier for the user to keep track of the records. Also,
EasyForex software provides some attractive powerful features such as account
details of the holder, like balance, leverage and margins, along with stop/limit
orders.
The trader also has the option of selecting various other currency pairs for
trading purposes. Before investing always analyse the forex market with various
types of forex analysis.
|
|
|
