What is Forex

What is Forex?

The Foreign Exchange market, also called Forex or FX, is the global market for currency trading. With a daily volume of more than $6.0 trillion, it is the biggest and most exciting financial market in the world. Whether you sell 100 Great British Pounds (GBP) to buy US dollars at the airport or a bank exchanges 100 million US dollars for Japanese Yen with another bank, both are Forex deals. The players on the Forex market range from huge financial organisations, managing billions, such as the major Central Banks, to individuals like yourself (retail traders) trading a few hundred pounds.

Trading Forex online

Thanks to the internet, you can trade on the Forex markets the way traders from the largest banks and investment funds do. All you need to get started is a computer/mobile device with internet access and a trading account with a reputable Forex broker.

How does Forex trading work?

On the Forex market one currency is exchanged for another according to an exchange rate (Buy/Sell rate). An exchange rate can rise or fall in a 24 hour period, 5 days a week. In general, the exchange rate reflects the health of an economy in comparison to other economies. If the economy of Great Britain is doing better than the economy of the United States, the Great British Pound (Sterling) will go up compared to the US dollar (GBPUSD ↑ ) and vice-versa.

How do you make money on the forex market?

Let’s take an example of a Forex trade. You decide to buy 1000 GBP against US dollars. Let’s say that currently, at the very moment the trade is executed, the GBPUSD exchange BUY rate is 1.4500, so you pay $1450 for your 1000 GBP. Some time later, the GBPUSD exchange SELL rate (the rate at which you can sell GBP for USD) is 1.5500. You sell your 1000 GBP and get 1550 USD – you’ve made a profit of 100 USD. Alternatively, the GBPUSD exchange SELL rate could be 1.3500. If you sell your 1000 GBP, you’ll get $1330. Having started with $1450, you now have $1350 – you’ve made a loss of $100. That’s how money is made or lost on the Forex market.

Spread

If you take a look at the Forex quotes on your trading platform (as well as the image above), you will see that there are two prices for each currency pair. One is the price at which you can buy and the other is the price at which you can sell. The difference between these two prices is known as the spread. The buy price is always higher than the sell price.

Leverage

If your Forex broker offers you a leverage of 1:100 you can trade with a 100 times more money than you have in your deposit. This means that if you want to buy 100 000 GBPUSD you only need to have a 1000 actual Pounds Sterling as desposit. With this kind of leverage you can take a position that is a 100 times larger in value and expect a 100 times bigger profit or loss, therefore great care is advisable when placing your trade.

Make your first Forex deal

To start, please get a FREE Practice Account and Sign up. The pick a currency pair (e.g. GBPUSD), choose a quantity and press the BUY button, if you expect the value to rise. Congratulations, you are now trading in a market used by millions of people all around the globe. You will earn money if the GBPUSD price goes up, and lose if it goes down. Check out your current profit or loss in the Open positions window. You can keep this position for as long as you like. When you no longer wish to keep your position, just close your trade by pressing the X button in the Open Positons window.

Long and Short trades

In the above example, we bet that the GBP will go up against the USD, so we bought GBPUSD hoping to sell it later at a higher price. This is called a long position. What should you do if you expect the GBP to go down against the USD? Well, then you do the opposite – you sell the GBPUSD with the hope to buy it cheaper later on, This short trading is how you take advantage of exchange rates that are going down. Trading many not be suitable for everyone and can result in the loss of all your invested capital.

Why trade using Forex signals?

Forex trading signal systems are used by Forex traders all over the world to aid them in making critical decisions about their trades. They are one of the most important tools a Forex trader has and almost all traders choose to use them in one way or another. There are many types of Forex signal systems, some are offered for free while others for a fee. A trustworthy service should include information about take profit and stop loss configurations. At EasyFX, you can get access to our Premium, Premium Plus, and Weekly Premium signals service for a small fee. The typical routine is to receive the trading signals directly to your mobile device using an encrypted app of some kind such as Telegram. The EasyFX signals system is based on a mixture of advanced technical analysis, news analytics and market sentiment information. Our signals have a win rate of 92%. We advise all retail traders to use the signals as a tool to better your trading system and to add further confluence to your own personal trading decisions.

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