Investing & Trading Lesson (Part 2) – Basic Knowledge of Investing & Trading – Forex : What is Forex?
I will continue about my investing & trading lesson. After you understand the risk i explained in my previous post, the first thing you must learn is about the basic knowledge. Ok…. I will start with Forex. Why Forex? Because, it kinda easy to understand.
Forex (Foreign exchange) market is the oldest market in the world. Forex Market also known as largest market in the world. The market working 24-hours a day from monday 04:00 AM to saturday 04:00 AM (my time is GMT+7). Because of its large volume of transactions every day, forex market is the highest liquidity of all the financial market.What to trade in Forex Market?
Currency Pairs (example : EUR/USD, USD/CHF, AUD/USD, etc).
Make Money on Forex
The concept about how we make money is very easy to understand. Just imagine how you buy Dollar / Euro currency on bank / money changer. If you buy dollar when the price is low and sell it when the price is high, then you’ll make profit. If you do the opposite, then you’ll lose money. The difference between what price you bought and what you sold is your profits / losses.
There are some differences between modern to traditional forex market (money changer). I will explain more detail in my next post. But for now, what you need to know is this. One of main difference between modern and traditional forex market is how the trade you can apply. If you can only buy in traditional market, you can do both (buy / sell) in modern forex market. If you buy and the price going higher, then you’ll make profit. If you sell and the price going lower, then you’ll make profit. If the currency pair move on the opposite way, then you’ll loose money.
So if you buy EUR/USD 1.3512 its mean that you buying 1 EURO by selling 1.3512 USD
There are several Currency usually trade in the market. They are :
USD = US Dollar
EUR = Euro
GBP = Poundsterling
JPY = Japanesse Yen
CHF = Swissy (Switchterland Currency)
CAD = Canadian Dollar
Ok… let’s continue with what is currency pair…
– Currency Pair
Question raised by most trader when they meet other trader is asking in what currency pair they usually trade. So… what is the currency pair? Currency Pair is a pair of 2 currency that traded in forex market.
Example : EUR/USD = 1.4589, so it’s mean that 1 Euro = 1.3255 USD
In Forex, there is a term called Based Currency. Based Currency is the currency that mentioned first in currency pair. And the currency mentioned after that called Counter Currency. Example : EUR/USD, the Based Currency of this pair is EUR, and Counter Currency is USD
There are a lot of currency pair in forex market, here are some of them :
For the next i will explain you about The Difference between Traditional & Modern Currency Market and Margin
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