Top Forex Brokers: The Easy Way To Start To Trade in Forex
The exchange rate in FOREX is calculated from the difference between currencies in currency pairs. For example, if at any point, Euro was worth 42 cents more than 1 United States dollar, then 1 Euro would cost 1 dollar and 42 cents. When a forex trader purchases Euro, he is also selling the same amount in US Dollars.
The currencies that are being bought and sold are collectively called the currency pair. The currency you use in your home country is referred as the base currency. The money you are buying is called the counter currency. Like all other market, Forex market uses currency codes abbreviations. This list can be found online.
The market also has a dealing desk and a no-dealing desk. A dealing desk is basically a forum where liquidity and prices are listed. Trades are executed in this forum. The person who offers the pricing, buys and sells the traded currency is known as the market maker. Sometimes, he creates an offset by offering the same trade to other participants. A no-dealing desk refers to brokers. Brokers conduct the trades for individuals or a corporation through other people’s dealing desks. They do not have a dealing desk of their own. Foreign exchange, or Forex, is an example of this kind of no-dealing desk. Forex is an Electronics Communications Network (ECN). This ECN offers marketplace with many market makers, traders and banks that can compete with bids. Forex gives them more trade options.
When one enters the Forex website, he will notice the sell quotes or prices mentioned on the left. The buy quote, also commonly known as the offer, is on the right. This is the price that the market maker is asking. The amount of pips between the purchase and sell price is called the spread. The smallest amount amount you can make is called the pip. Pip can either be fixed or variable.
The standard amount of currency from the base is referred as the lot. This amount is usually one hundred thousand units while ten thousand units are considered as a mini lot. A micro is one thousand units. When you want to open an account or position, you have to deposit a certain amount. This deposit is known as the margin. You can buy or sell this position too. Leverage is when you buy a position that is more than your margin. Traders can earn more money from particular deals by leveraging,
Manual execution is when a dealer intervenes, executes and orders manually. When an order is executed without the dealer’s involvement, the process is called an automatic execution. At times, when a manual execution takes place, there is a difference between the executed price and the order price. This difference is known as slippage. The draw down is a phrase commonly used to show the decrease in the balance of trader’s account from the top, or peak, to the bottom, or valley.
Trading foreign currencies is a potentially profitable opportunity for traders who are educated and experienced. What many do not realize is that very high risk factors are associated with it. A Forex trader should always be prepared for loss. It is considered wise to never invest money that is important to you. You should only invest the amount of money that you cannot afford to lose. If you are a new trader, make sure you read and learn enough about Forex trading. There are many helpful articles, eBooks and forums in the internet that can guide beginner traders through their journey in Forex. Forex is a great platform for investment and can benefit many people.
Top Forex Brokers
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HotForex-The Best Forex Broker
