Traditionally, the Forex market has been the domain for banks, institutions and governments. But in 2018, more and more retail traders are moving to the Forex markets for the outstanding investment opportunities available.
After all, the Forex markets are the largest, most liquid markets in the world, turning over $US5 trillion a day.
In this article, we are going to cover the basics of the Foreign Exchange Market.
When it comes to trading Forex, you will notice all prices are quoted in pairs.
You have the Euro vs the US dollar, the British Pound vs the US dollar, the Japanese Yen vs the US dollar and so on.
When trading Forex, you are always buying one currency and selling the other.
Prices are quoted according to the base currency and counter currency.
The first price is called the base currency, and the 2nd part is called the counter currency.
Forex pairs are broken up into majors and minor FX pairs.
A major is a currency pair that involves the USD on one side of the quote.
The key Forex majors are:
A minor FX pair or Forex cross is a pair without the US dollar involved.
Here are some examples of FX minor pairs.
You also get Forex exotics. Forex exotics are thinly traded FX pairs and are often very volatile. Examples of exotics are USD/NOK and USD/MXN.
You must know your lot sizes when it comes to trading Forex.
Imagine placing a trade which you think is for $50,000, but you accidentally place it for $500,000. Positions sizes get out of hand quickly when it comes to making mistakes in the Forex markets.
Most Forex brokers allow you to trade as little as one micro contract.
Having the flexibility in trading $US1,000 increments is ideal for those who understand and can use advanced money management and position sizing rules.
But now, every broker shows the
So, a pip is the tick movement at the 4th decimal place.
A one pip movement on the Eurodollar would be when the price moves from 1.3175 to 1.3176.
Now you have the Forex basics explained.
We welcome you to give our team a call to discuss your investment goals and objectives.
You can call Walker Capital Australia on +61 2 8076 2210, and we’ll see how we can help you achieve your investment goals.
Or for more information on currency investing, check out our full article: 7 Key Reasons Why Australians Invest In The Currency Markets.