Market Exchange Rates (Foreign Exchange, Forex) market is functioning without interruption, in which national currencies are traded, typically via brokers. Foreign currencies are constantly and simultaneously bought and sold on the domestic and international markets, and the value of the invested amounts grow or shrink depending on currency movements. Conditions in the foreign exchange market can change at any time because of the events in real time. 

The main incentive to conduct foreign exchange transactions by private investors and short-term advantage of Forex trading is the ability to conclude transactions 24 hours a day, 5 days a week, with unlimited access to the Forex market investors around the world. Additional advantages of the Forex market are: The huge liquid market facilitates trading

in almost all currencies. Volatility of market prices, offering the possibility of profits. Forex Standard instruments for controlling the maximum risk. Leverage the required small deposit protection. Many options for zero commission transactions.

Forex Trading

The objective of the investor in the Forex market is the profit of the foreign exchange rate changes. Forex Trading and foreign exchange transactions are always done in currency pairs. For example, the exchange rate of EUR / USD on 26 August 2003 was 1.0857. This number is also referred to as a "Forex rate" or simply "rate". If an investor had bought 1000 euros on that date, pay U.S. $ 1,085.70. A year later, the Forex rate was 1.2083, which means that the value of the euro (the numerator against the EUR / USD) rose against the U.S. dollar. The investor could then sell the 1000 euros and receive $ 1,208.30. Thus, the investor would gain U.S. $ 122.60 compared with the previous year. But to know whether the investor has invested well, you have to compare this investment option to alternative investments. Return on investment (ROI) should be at least comparable with the return on investment without risk. One example of a risk-free investment is long-term U.S. government bonds since there is practically no possibility of bankruptcy losses, ie the U.S. government or the inability or the inability or refusal to pay debts. (However, note that previous actions do not determine the future)

By entering into transactions in foreign currencies an investor should start the game only if you expect the currency you buy, will gain in value against the currency you sell. If the currency you bought an investor, gains in value, the currency must be sold early to ensure a profit. Open a transaction (also called open position) is a transaction in which an investor has bought or sold a particular currency pair and has not sold yet or not redeem the equivalent amount to close the position.

However, it is estimated that approximately 70% -90% of the Forex market is speculative. In other words, if a person or institution has bought or sold the currency has no intention to actually pay the money at the end, but rather, it was pure speculation associated with the movement of the currency.

Exchange rate

Because currencies are traded in pairs and exchanged one another, the rate at which they are exchanged is called the exchange rate. Most currencies in exchange for U.S. dollar (USD). The next four currencies, which is made mostly of exchange, the euro (EUR), Japanese Yen (JPY), British pound sterling (GBP) and Swiss franc (CHF). These five currencies in the majority of the market and they are called major currencies or larger. Some sources also belong to them, the Australian dollar (AUD).

The first currency in the exchange pair is referred to as the base currency and the second as the currency quoted. Thus quoted currency is the numerator in this ratio, and the base currency is the denominator. The value of the base currency (denominator) is always 1 Therefore, the exchange rate tells you how much you have to pay the quoted currency to obtain one unit of base currency. The exchange rate also determines how much a seller receives quoted in the currency when selling one unit of base currency. For example, the exchange rate of EUR / USD is 1.2083, and means that the buyer has to pay EUR 1.2083 USD per 1 Euro.

At any time and place, if an investor buys a currency and immediately sells it - and the exchange rate is not any change - the investor loses money. The reason for this is that the purchase price, which determines how much the investor will receive the quoted currency when selling one unit of base currency is always lower than the selling price, which determines how much must be paid in the currency quoted in the purchase of one unit of base currency. For example, the odds buy / sell exchange EUR / USD in your bank may be 1.2015 / 1.3015, which means "cradle" of 1000 pips (also called points, one pip = 0.0001). This is a very large value compared to the rate of sale of exchange which normally meets on the Internet investors in the Forex market, such as 1.2015 / 1.2020, the "cradle" amounting to only 5 pips. Generally, smaller forks are better for Forex investors since even such brackets require the movement of exchange rates in order to profit.

Most investors in the Forex market, including Easy Forex ™ platform, gaining the "cradle of the price" in exchange rates. Margin - the amount allocated to risk Banks and / or entities for transactions via the Internet require security as a proof that the investor is able to. Such security is called "margin" or "minimum security" on the Forex markets. In practice, this is a payment on account of the investor, which is meant to cover possible losses arising from transactions in the future.

Deposit allows investors to trade in markets that have high minimum units, which can be rotated, allowing investors to occupy a much stronger position than would result from the state account. The security deposit also increases profits, but has a tendency to widen losses, not to mention the risk of the system.

Leverage

Leverage financial, ie the use of credit, such as a transaction made in a security deposit is often used in the Forex market. The loan / leverage in the margin account is secured in the form of the initial payment of the investor. Consequently, an investor can operate up to 100 U.S. $ 000 while having only $ 1,000. A relatively small market movement will have a proportionately larger impact on the payments made or yet to be paid in the future. This may work in favor of or against the investor. You may incur losses in the amount of prepayment means and any additional funds paid to improve the position of the investor. Five ways to conclude the transaction by a private investor in the Forex market, directly or indirectly:

Market transactions "spot market" Forward contracts and transactions in a timely Options Contracts of exchange differences Type of spread betting transactions The transaction is a "spot market" The transaction is a "spot market" is a simple exchange of one currency for another. Spot rate is equal to the current market price, also called the reference price. Transactions spot (immediate) do not require immediate execution, or payment. Date of application or date of "determination rate" is the next working day after the date of the contract (transaction date), in which the transaction is agreed upon by the two investors. The two-day period of time to confirm the agreement and to establish settlements and the necessary charges and payments to bank accounts in various places in the world.

Risk

While transactions in the Forex market can yield substantial profits, but there are also risks : associated with exchange rates, interest rates and political risk. Approximately 80% of all transactions lasts for seven days or less, while 40% take less than two days. Given the extremely short duration of a typical transaction, technical indicators heavily influence decisions about inputs, outputs, and the order.

More information

For more information on the above-mentioned topics, please read the article strategy of "day trading" , leverage , and currency pairs . To learn more about the Forex market instruments available in the platform, Easy-Forex invite you to read the article online Forex account .