Foreign trading can stem from a lack of understanding of several important factors. Let’s explore these things with Learn Forex Trading to increase your chances of success and minimize risks.
Foreign and basic information when trading?
We will learn about basic concepts and important information related to the Foreign market. The article will help you better understand the factors that influence trading decisions. How to apply them in your investment strategy.
What is Foreign Trading?
The term Foreign combines “foreign currency” and “exchange”. Describes the process of converting currencies to each other for various purposes. Mainly to serve trade, commerce, and tourism.
Trading volume in the Foreign market reached approximately $6.6 trillion daily in 2019. Popular instruments used in international trading include:
Cryptocurrencies, also known as cryptocurrencies such as Bitcoin, Ethereum, and other virtual currencies.
Foreign currency certificates such as stocks, corporate bonds, and government bonds.
Payment instruments in foreign currency such as checks, money orders, bills of exchange, etc.
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Popular forms of trading on the Foreign market
In the Foreign market, there are many popular trading forms, bringing flexibility and diversity to investors. Below is a short description of notable forms of trading:
Spot Trading: The most common form, in which transactions are performed immediately at the current market price.
Forward transaction: The investor and the bank agree on a futures price to trade a specific amount of currency at a future date.
Foreign options (Options): Investors have the right, but not the obligation, to buy or sell a currency at a specific price and time.
CFD (Contract for Difference) Trading: Investors bet on the price difference between the purchase price and the sale price without owning the actual asset.
AlgorithmLearn Forex Trading: Use computer algorithms to make trading decisions automatically, based on market conditions.
Social Trading: Investors can follow and copy the trades of experienced traders through social trading platforms.
Foreign trading and what traders need to know
Beginners in the field of Foreign forex exchange platform need to take time to learn. This includes understanding how trading works and the regulations related to trading. So the deciding factors in investing through a broker are specifically as follows:
What subjects related to forex include?
Traders can choose to trade with different entities in the Foreign market:
State Governments and Central Banks:
Choosing major partners such as the Federal Reserve Bank, Bank of England and European Central Bank helps minimize unwanted risks.
Foreign Broker
Using online trading platforms through brokers provides retail investors access to the global currency markets.
Big bank:
Invest safely at leading banks such as Goldman Sachs, Deutsche Bank, and Citibank. A place with a large daily transaction volume and high net worth.
Retail investors:
According to estimates, individuals trade about 1.5 trillion US dollars every day through platforms provided by Foreign brokers. However, traders should note that currently, Foreign investment in UK is not yet licensed and may be considered a violation of the law.
Commodities traded when trading forex
In the process of buying and selling Foreign, the main commodity is currency. Where one fund is bought and another fund is sold simultaneously. Trading can be done directly or through the intermediary of a broker.
Current terms related to Foreign
If you are new to the Foreign market, the terms below will certainly be very useful to you when performing fundamental analysis!
Exchange rates in Forex
An exchange rate is a number that regulates the exchange value between two currencies in the Foreign market. For a specific example, we have the EUR/USD exchange rate of 1.20, one euro is equivalent to 1.20 US dollars.
Exchange rates fluctuate according to economic, and political factors and global events. Traders use this information to predict the direction of exchange rates and make trading decisions. The exchange rate is an important factor affecting the value and profit of foreign transactions
Base currency and quote currency at forex
In the Foreign (Forex) market, base currency and quote currency are two important concepts.
Base currency: The currency used to determine the value of a currency pair. For example, in the EUR/USD pair, the Euro is the base currency, and the value of the pair represents how many US dollars it takes to buy one Euro.
Pricing currency: A currency used to represent the value of a currency pair. In the EUR/USD pair, the US dollar is the quoted currency, and the value of the pair indicates how many Euros you can buy with one US dollar.
Buying price and selling price of Foreign investment
In Foreign investment, buying price and selling price are two important concepts:
Ask Price: This is the price you pay when buying a currency pair. It is usually higher than the selling price and is displayed on the right when viewing the price chart.
Bid Price: This is the price you receive when you sell a currency pair. It is usually lower than the purchase price and is displayed on the left when viewing the price chart.
The difference between the buying price (ask) and selling price (bid) is called the “spread”. For more details, please continue following the content below of this article!
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Spreads, slippage, and pips in Forex trading
In Foreign (forex) trading, there are three important concepts: spreads, slippage, and pips.
Spread: This is the difference between the buying price and selling price of a currency pair. The term Spread represents the cost a trader must pay when opening a position.
Slippage: This is the difference between the actual price at which you made the transaction and the price you expected. Slippage often occurs during volatile market conditions and can increase transaction costs.
Pips: This is the smallest unit of measurement of price in Foreign transactions. Often used to measure price fluctuations. For example, if the price increases from 1.3000 to 1.3020, this increase is 20 pips.
Foreign leverage and margin
Leverage in Foreign trading is the ability to open a position larger than the actual amount of capital you invest. This is achieved through borrowing large amounts of money from the broker.
Margin is the percentage of capital that you must hold to maintain a position. If the loss exceeds the margin, you may be forced to close the position. Leverage and margin are important factors to consider when doing Foreign trading
Conclude
To be successful in Foreign investment, traders need to build a solid knowledge base about the market. At the same time, Learn Forex Trading understands setting up a specifLearn Forex Trading strategy. Along with patience and focus to overcome the challenges of this market.
FAQ
Is Forex trading risky or not?
Yes, Foreign trading carries risks due to market fluctuations. Manage risks to protect invested capital and achieve positive results over the long term.
How to identify trends in the Foreign market?
To identify trends, traders often use tools such as moving averages and price models. Technical indicators to make predictions about the direction of price movement.
Benefits of participating in Forex trading
High profitability, flexible hours, diverse currency pairs, and high liquidity. At the same time, the support of leverage is also a high benefit.
