With an average daily transaction volume of more than US$5 trillion, the foreign exchange market is the world’s largest and most traded market. This market is one of the largest and most liquid financial markets in the world. It converts one currency into another. Because there is no central location or exchange, trading can be done 24 hours a days (Sunday night to Friday night). This market can help you make huge profits. However, you need to be knowledgeable about forex markets.
Forex trading lets you take advantage of fluctuations in exchange rates for large foreign currency pairs. Currency pairs play an important role in forex trading. Forex transactions are typically done in pairs, such as GBP/USD. You can speculate on the possibility that the currency of one country will be more expensive or less expensive than the currency of another country, opening up a corresponding position.
CURRENCY AND RELATIVE CURRENCY
As an example, take the GBP/USD currency pairing. The names of both currencies are divided by the forward-slash (‘/’).
How do you conduct foreign exchange transactions?
You speculate on the future price of the base currency versus the relative currency when trading foreign currency. In the GBP/USD pair you can buy the pair if the pound is expected to rise against the dollar. If you believe that the pound is going to fall against the dollar (or that the dollar will rise against pound), then sell the pair.
You will make money if you are right. If the deal is not good for you, you’ll lose money.
Forex trading can be done with leverage. However, this will not only increase your earnings but also your risk of losing money. You will need to devise your own strategies to manage your losses.
What’s margin and leverage?
Forex trading can be done using margin trading. You only need to deposit a small percentage of the funds that you wish to trade. Our margin rate can be as low as 0.2% and it can also be considered leverage of 500 to 1. This means that the total position value will be 500 times the amount of funds you have to deposit. Remember that margin calls are based on the entire position and not just the portion of funds deposited. Therefore, your loss may be greater than the original deposit. This formula can calculate the margin level.
Margin Level = (Equity/Necessary Margin) x 100
It is difficult to create a forex trading system that works. This requires knowledge and foresight. This information is essential to begin trading on the forex market.
