Forex
Trading
Currency pair trading, also known as FX or Forex (foreign exchange), enables traders to take advantage of increases and decreases in a currency’s value.
What is Forex Trading?
Currencies are always traded in pairs, with the first currency in the pair called the base currency and the second called the quote currency. Forex traders simultaneously buy one currency in the pair and sell the other, depending on how they think the currencies’ values will change in relation to each other.
Currency values can be affected by a vast number of fundamental factors that impact the health of a nation’s economy, including inflation, interest rates, government debt levels, and political stability. Typically, forex investors find the greatest volatility before and after key economic or political announcements as traders speculate on their potential impact.
Currency pairs are split into three categories. Major currency pairs are the most traded pairs in the forex industry and therefore enjoy the most liquidity. They usually include the US dollar as one-half of the pair, like the EUR/USD and the USD/JPY. Other commonly traded major pairs include EUR/JPY and EUR/GBP.
Currency values can be affected by a vast number of fundamental factors that impact the health of a nation’s economy, including inflation, interest rates, government debt levels, and political stability. Typically, forex investors find the greatest volatility before and after key economic or political announcements as traders speculate on their potential impact.
Currency pairs are split into three categories. Major currency pairs are the most traded pairs in the forex industry and therefore enjoy the most liquidity. They usually include the US dollar as one-half of the pair, like the EUR/USD and the USD/JPY. Other commonly traded major pairs include EUR/JPY and EUR/GBP.
Forex FAQs
How Does Forex Trading Work?
There is an endless number of factors that all contribute to and influence the prices in forex trading (i.e. currency rates) daily, but it could be safe to say that there are 6 major factors that contribute the most and are more or less the main driving forces for forex trading price fluctuation:
1. Differentials in inflation
2. Differentials in interest rates
3. Current account deficits
4. Public debt
5. Terms of trade
6. Political and economic stability
In order to best comprehend the above 6 factors, you will have to keep in mind that currencies are traded against one another. So when one falls, another one rises as the price denomination of any currency is always stated against another currency.
1. Differentials in inflation
2. Differentials in interest rates
3. Current account deficits
4. Public debt
5. Terms of trade
6. Political and economic stability
In order to best comprehend the above 6 factors, you will have to keep in mind that currencies are traded against one another. So when one falls, another one rises as the price denomination of any currency is always stated against another currency.
What is Forex Trading Software?
Forex trading software is an online trading platform provided to each of our clients, which allows them to view, analyze and trade currencies, or other asset classes
In simple terms, each of our clients is provided access to a trading platform (i.e. software) that is directly connected to the global market price feed and allows them to perform transactions without the help of a third party.
In simple terms, each of our clients is provided access to a trading platform (i.e. software) that is directly connected to the global market price feed and allows them to perform transactions without the help of a third party.
Who are Forex Trading Market Participants?
Forex trading market participants can fall into any of the following categories:
1. Travelers or overseas consumers who exchange money to travel overseas or purchase goods overseas.
2. Businesses that purchase raw materials or goods from overseas need to exchange their local currency for the currency of the country of the seller.
3. Investors or speculators who exchange currencies, that either require a foreign currency, to perform trading in equities or other asset classes from overseas or either are trading currencies with the aim of making a profit from market changes.
4. Banking institutions exchange money to service their clients or lend money to overseas clients.
5. Governments or central banks that either buy or sell currencies and try to adjust financial imbalances or adjust economic conditions.
1. Travelers or overseas consumers who exchange money to travel overseas or purchase goods overseas.
2. Businesses that purchase raw materials or goods from overseas need to exchange their local currency for the currency of the country of the seller.
3. Investors or speculators who exchange currencies, that either require a foreign currency, to perform trading in equities or other asset classes from overseas or either are trading currencies with the aim of making a profit from market changes.
4. Banking institutions exchange money to service their clients or lend money to overseas clients.
5. Governments or central banks that either buy or sell currencies and try to adjust financial imbalances or adjust economic conditions.
What is Important in Forex Trading?
As a retail foreign exchange trader, the most important factors that affect your trading is trade execution quality, speed, and spreads. One affects the other.
A spread is a difference between the bid and the asking price of a currency pair (buy or sell price), and so to make it even easier it is the price at which your broker or bank is willing to sell or buy your requested trade order. Spreads, however, only matter with the correct execution.
In the forex trading marketplace, when we refer to execution we mean the speed at which a foreign exchange trader can actually buy or sell what they see on their screen or what they are quoted as bid/ask price over the phone. A good price makes no sense if your bank or broker cannot fill your order fast enough to get that bid/ask price.
A spread is a difference between the bid and the asking price of a currency pair (buy or sell price), and so to make it even easier it is the price at which your broker or bank is willing to sell or buy your requested trade order. Spreads, however, only matter with the correct execution.
In the forex trading marketplace, when we refer to execution we mean the speed at which a foreign exchange trader can actually buy or sell what they see on their screen or what they are quoted as bid/ask price over the phone. A good price makes no sense if your bank or broker cannot fill your order fast enough to get that bid/ask price.
What are Majors in Forex Trading?
In forex trading, some currency pairs are nicknamed majors (major pairs). This category includes the most traded currency pairs and they always include the USD on one side.
Major pairs include:
EUR/USD
USD/JPY
GBP/USD
USD/CHF
USD/CAD
AUD/USD
NZD/USD
Major pairs include:
EUR/USD
USD/JPY
GBP/USD
USD/CHF
USD/CAD
AUD/USD
NZD/USD
What are Minors in Forex Trading?
In forex trading, minor currency pairs or crosses are all currency pairs that do not include the USD on one side.
What are Exotics in Forex Trading?
In forex trading, exotic pairs or exotics refer to currency pairs that include a major currency paired with the currency of a smaller or emerging economy. Exotic pairs tend to be traded less frequently, in comparison to majors. They usually have more volatility and are less liquid.
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