In Forex currency trading all currencies are traded in pairs and each is assigned with an abbreviation (for example, EUR for a Euro, GBP for a British Pound, USD for a US Dollar, JPY for a Japanese Yen, CAD for a Canadian Dollar etc). These abbreviations may be shortened on certain currency trading software. For example EURGBP could be shortened to EUGB.
The “Base” currency” is the first currency in the pair. The “Quote” currency, or “counter” currency is the second currency in the pair.
|Base Currency||Quote Currency||Exchange Rate|
This abbreviation specifies how much you have to pay in the quote currency to obtain one unit of the base currency (in this example, 117.125 Japanese Yen for one Euro.
The minimum rate fluctuation is called a point or a pip. 1 pip is 0.01 (for currency pairs with JPY) or for the rest of the pairs – 0.0001. Hantec offers fractional pips, which is why on your fx trading platform you will see 5 or 3 (for JPY pairs) digits after the point (0.00001/0.001).
The currency pairs on Forex are quoted as the Bid and Ask (or Offer) prices:
|Base Currency||Bid Price||Ask Price|
Bid: the rate at which you can sell the base currency, in our case it’s the Euro, and buy the quote currency, i.e the Japanese Yen.
Ask (or Offer): the rate at which you can buy the base currency, in our case the Euro, and sell the quote currency, i.e. the Japanese Yen.
Spreads: the difference between the Bid and the Ask prices.
Currency rate: the value of one currency expressed in terms of another. The fluctuation rate depends on numerous factors including the supply and demand on the market and/or open market operations by a government or by a central bank.
Lot: usually contract size is based on a lot system, and for most currency pairs 1 lot is 100,000 units of a base currency.
When a forex trader trades in Forex, they always trade a combination of two currencies. These are referred to as a currency pair. Foreign Exchange traders generate profits (or losses), regardless of whether a currency is rising or falling, by buying one currency. FX Traders or in some cases automated FX trading systems can take a long position – buying a currency – at one price and aiming to sell it later at a higher price. Another alternative is to take a short position – selling a currency – they anticipate it will depreciate and aim to buy the currency back later at a lower price.
Generally, the major currencies traded are from countries with stable governments and established central banks that closely scrutinise their home economies. These include U.S. Dollar, the Euro, the Japanese Yen, the Swiss Franc and the British Pound. Other currencies are also available. For a complete list of tradable currencies with Hantec please forex spreads.
While Forex is the most liquid of all markets, there are many more factors that can have a direct impact on the liquidity available for trading a particular currency. The fx trader also decides the level of trading risk but there are ways to limit losses for those who are more cautious. A limit order ensures a position is closed once a price level in the market has been reached. And a stop order automatically liquidates a position at a chosen price level. However, volatile markets can result in prices gapping, which may prevent the execution of the following forex trades orders (sell stop, buy stop, stop loss) at the requested stop price.
Online foreign exchange trading has grown in popularity in recent years. Forex trading robots and Forex trading signals providers have meant that automated forex trading has seen a dramatic rise. Online forex brokers offer fx traders fx trading online the opportunity to download an online fx trading platform and open an forex trading account to test drive their fx trading strategies.
Many brokers also offer education packages to complement their currency trading systems that teach new fx traders all they need to know about foreign currency trading.