Lesson 2: How FOREX market works?
Welcome to Forex lesson series. If you didn't go through Lesson 1, pls take a look at here. In this lesson I hope to share basic knowledge about Forex trading and some specific works you must know before start trading. So let's get started.
There are many currency types available in Forex market. As example US Dollar, Euro, British pound, Japanese yen, Australian Dollar, Canadian Dollar, Bitcoin and also Gold, Oil, Silver are being traded. Consider a currency pair eur/usd in Forex market. Now it rate is 1.2340. So, it means to get 1 eur you have to pay 1.2340 usd. Here eur is based currency and usd is quote currency. When we feel this rate will goes up, we start Buy(Ask) trade and when we feel this rate goes down, we start Sell(Bid) trade. This is simple explanation for buy and sell tradings.
Think, now eur/usd rate is 1.2341. It means one eur increased in 0.0001 usd. So we recognize 1 eur as one unit of eur and the change of rate 0.0001 as a pip. So think eur/usd rate has given in five decimal point like 1.23400 and now it 1.23401. Then find the increment of rate in pips(comment your answer). 100,000 of units we defined as a lot. So, now you are clear about units, pips and lots. Think, we buy one unit of eur at the rate 1.2340 and now it comes to 1.2350. So we close the trade and take profit. You know how much we earn? Yes it's 0.0010$ 😏. The profit is negligible. That is why we trade more units. But in trading we recognized it as Volume. Volume represent as a percentage of lot. Example, volume is 0.01 means you trade 0.01 lot, 1000 units. In Forex trading minimal volume is 0.01.
So, you buy 1 lot eur at rate of 1.2340. For than you have to spend 1.2340*100,000 (current price* units). 112340 $ u need to buy 1 lot of eur at this time. Can u invest this much money ?😍 I know you can't. Even if you can you will not do this. OK, That's why we need Forex broker. The main function of broker is giving a support to trade us. We define it as leverage. Different brokers provide different leverage(1:100,1:200, 1:500, 1:1000). But when leverage goes high we can get good support from them.
But we no need other supporting companies😉Are you still paying 150$- 300$ per month for them?.
Think, Our broker provides 1:1000 leverage for traders. Then how much you need to buy a lot? Actually 1:1000 means when we invest 1$ per trade, company multiply it 1000 times(1000$). So our above example needs 112340$ to buy a lot. To invest this value we actually need 112340/1000$. The amount is 112.34$😘.
This is ending of Lesson 2 and I hope now you have better understand about Forex and pls, add comment if you have any question related with this. Also anyone feel this calculations are too complex, just leave it. I share those details who likes to lean deep. See you with Lesson 3.
Good day...!!!
There are many currency types available in Forex market. As example US Dollar, Euro, British pound, Japanese yen, Australian Dollar, Canadian Dollar, Bitcoin and also Gold, Oil, Silver are being traded. Consider a currency pair eur/usd in Forex market. Now it rate is 1.2340. So, it means to get 1 eur you have to pay 1.2340 usd. Here eur is based currency and usd is quote currency. When we feel this rate will goes up, we start Buy(Ask) trade and when we feel this rate goes down, we start Sell(Bid) trade. This is simple explanation for buy and sell tradings.
Think, now eur/usd rate is 1.2341. It means one eur increased in 0.0001 usd. So we recognize 1 eur as one unit of eur and the change of rate 0.0001 as a pip. So think eur/usd rate has given in five decimal point like 1.23400 and now it 1.23401. Then find the increment of rate in pips(comment your answer). 100,000 of units we defined as a lot. So, now you are clear about units, pips and lots. Think, we buy one unit of eur at the rate 1.2340 and now it comes to 1.2350. So we close the trade and take profit. You know how much we earn? Yes it's 0.0010$ 😏. The profit is negligible. That is why we trade more units. But in trading we recognized it as Volume. Volume represent as a percentage of lot. Example, volume is 0.01 means you trade 0.01 lot, 1000 units. In Forex trading minimal volume is 0.01.
So, you buy 1 lot eur at rate of 1.2340. For than you have to spend 1.2340*100,000 (current price* units). 112340 $ u need to buy 1 lot of eur at this time. Can u invest this much money ?😍 I know you can't. Even if you can you will not do this. OK, That's why we need Forex broker. The main function of broker is giving a support to trade us. We define it as leverage. Different brokers provide different leverage(1:100,1:200, 1:500, 1:1000). But when leverage goes high we can get good support from them.
But we no need other supporting companies😉Are you still paying 150$- 300$ per month for them?.
Think, Our broker provides 1:1000 leverage for traders. Then how much you need to buy a lot? Actually 1:1000 means when we invest 1$ per trade, company multiply it 1000 times(1000$). So our above example needs 112340$ to buy a lot. To invest this value we actually need 112340/1000$. The amount is 112.34$😘.
This is ending of Lesson 2 and I hope now you have better understand about Forex and pls, add comment if you have any question related with this. Also anyone feel this calculations are too complex, just leave it. I share those details who likes to lean deep. See you with Lesson 3.
Good day...!!!
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