Forex is short for
Foreign Exchange and refers to the buying and selling of foreign currencies.
Trading Forex is an exciting way to participate in and profit from the
constantly moving global currency markets.
Each time you trade forex
you are simultaneously buying a currency and selling another one. Because of
this, they are always quoted in pairs, for example; EUR/USD or EUR/GBP. The
first currency in the pair is known as the base currency, and the second is the
quote currency. The price quoted represents how much of the quote currency you
can buy with one unit of the base currency. For example, if the currency pair
GBP/USD was quoted at 1.5500, then you can buy 1 British Pound for 1.5500 US
Dollars.
When trading forex, you
will always be quoted two prices for the currency pair. The first price is
known as the Bid price, and the second price is known as the Ask, or Offer
price. The Bid price represents the price given if you want to Sell the pair,
and the Ask price represents the price quoted if you want to Buy the pair. For
example, for EUR/USD you may be quoted a Bid price of 1.5500 and an Ask price
of 1.5502. The difference between the two is known as the spread.
What
are pips?
Forex Pips are the
smallest units of possible change in a given currency pair. When a pair trades
one pip differently, it is a .0001 difference. However currency pairs with
Japanese yen as the second unit will be .01. A pip is the smallest unit of
movement. The formula for calculating a pip's value is the pip's decimal place
times the amount of units you've bought. For example, if you've purchased
$100,000 units of the EUR/USD pair, you've bought 100,000 Euros using US
dollars to buy them. This currency pair is calculated at four digits after the
decimal point, so each pip equals .0001. At $100,000, every pip is worth $10.
If you have purchases a currency pair with Japanese yen as the second unit, the
pip's decimal place will be .01.
What
is Leverage?
Forex Bulls offers
leverage of up to 1:400. This means that with just a small amount of capital
traders can take much larger positions in the market. For example, with just
$1000, a trader could buy $200,000 of contracts, meaning much bigger potential
for profit is possible.
The eight 'major'
currencies traded on the forex market are:
· U.S. Dollar (USD)
· British Pound (GBP)
· Euro (EUR)
· Japanese Yen (JPY)
· Canadian Dollar (CAD)
· Swiss Franc (CHF)
· New Zealand Dollar (NZD)
· Australian Dollar (AUD)
N. BURMAN, Forex4nb
forex4nb@gmail.com
