Forex is an abbreviation commonly used for "foreign exchange" or "currency exchange" and is often used to describe the trading in Forex by investors and speculators.
For example, imagine a situation in which it is expected that the value of the U.S. dollar to weaken relative to the euro. A trader of forex in this situation is to sell dollarsand buy euros. If the euro strengthens, the purchasing power to buy dollars has increased. The trader can now return to buy more dollars of what he had started, earning a profit.
This is similar to trading. A broker will buy an action if you think that the price will increase in the future and sell an action if it thinks that its price will fall in the future. Likewise, a forex trader will buy a currency pair if you expected the exchange rate to increase in the future and will sell a currency pair if you expect the exchange rate to fall in the future.
What is the Forex market?
Currency Forex (Foreign Exchange FX) market is the largest financial market and liquid in the world, with a daily trading that exceeds the daily joint negotiation of all world stock and bond markets. It allows investors from around the world buy and sell foreign exchange through the exchange between bidders and applicants of the same.
When it comes to investing in currencies should bear in mind that currency tradingpairs, so that the first currency indicates the number of units of the second currencyaccording to the exchange rate. In this way, a quote euro 1.40 dollar (EUR USD) indicates that a euro is equivalent to 1.40 dollars.
It offers an operating with leverage, since when it comes to trading Forex'll just puta percentage of the total amount of the transaction - from 2.5% - in concept of guarantees.
They allow to invest upward (buy currency pair) and reverse down (sell currencypair) on any currency pair, given that there are no restrictions on short-selling in.
The FX market belongs to the category of non-organized market or OTC (over the counter). It's a decentralized market, whose operations are performed via the Internet or by telephone.
How they traded currencies in Forex?
Currencies are traded in pairs, for example
EUR/USD (euro dollar),
USD/JPY (dollar against the yen),
GPB/USD (pound against the dollar),
USD/CHF (dollar against the Swiss franc).
The first currency is called "base", while the second is known as his "counterpart".
At the interbank level, one always thinks in terms of the price of the base currency. For example, if you buy EUR/USD are buying euros and selling dollars.
Is the equivalence relation with the dollars that cost to buy those euros.
For example: the EUR/USD pair: 1.45
Means that every euro that you buy payment it 1.45 dollars.
I need to 1.45 dollars to buy one euro.
When the price of the EUR/USD reaches 1.50 i.e. uptrend my euro will be worth 1.50 dollars.
So if I sell my euro who buy it to 1.45 dollars it will now be worth $1.50 and I won us $0.50 for every euro that I have.
But you have to keep in mind that the positions do not vary in cents but cents for example:
EUR/USD: 1,4510-1,4527 the difference is 0.0017 dollars per euro. (17 pips) for 100:1leverage
Equivalent to 17% of profitability in a single operation.
If we have entered profit buying 5000 euros is u$ s $850.
But that happens with the broker: the money leverage 1:100
Enter the market with one 100 times greater capital u$ s 500000 broker leveraged my money.
Broker lent me $500000 to account for the market the won 17% of the money you lent me least u$ s 850 which I pay me for my operation the broker earned u$ s 84150
Several currency pairs can be operated at the same time.
Automated systems can operate up to 20 currency pairs at a time.
You can use various leverages 2:1 10:1 20:1 50:1 100:1, 1000:1 depending on the broker to manage risk
There is no minimum residence time, one can be removed at any time.
You can choose the limit of loss and gain:
Configures the system to if not met the trend upward or downward operation is closed automatically by placing the maximum deviation which you want to tolerate: stop loss and take profit.
Where loss cannot set loss limits to reach the limit of money that is operating the operation shuts down and never due to the broker.
Forex is not a physical currency exchange. Carry this function - the physical change -
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