What I Need To Know About Forex Trading

Forex trading refers to the buying and selling of currency pairs in order to generate profit. The goal is simple; earn by trading the constant fluctuations of major currency pairs.

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While some people compare Forex trading to buying foreign currency at a traditional money exchange, it is quite different.

The biggest difference when it comes to Forex trading is that you never own the physical currencies you trade. Of course, when you go to an exchange office, you have to give the person some of your money in one currency to get money in another currency.

(meaning you buy the Euro (EUR) expecting it to do well against the US Dollar (USD))

, you don’t actually have USD, nor do you have to sell USD to buy them.

How And When To Buy Or Sell In Forex Trading

What happens instead is that the forex broker you use electronically records your order and writes you any profits or losses from the trade based on how currency rates change.

If the odds move in your favor, you will profit. If the odds move against you, you will suffer losses. And if you want to stop trading, you simply exit the position. You never actually own the physical currencies you trade.

You will immediately realize how competitive forex spreads are compared to the spread we are used to seeing on the board at traditional exchanges. While most forex traders earn a spread of around $0.01 or $0.02 for every dollar traded, the Forex spread can be as high as $0.00006.

The spread you encounter is important because it ultimately affects the profitability of your trades. Traders start each trade with a small loss because of the spread they create. Therefore, the lower the spread, the easier it is to break and subsequently profit from their trade.

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Large brokers like IG are able to offer competitive spreads to their customers due to the volume of transactions they process every day. The table below shows the minimum and average spreads that traders can expect from IG across the major currency pairs.

If you’re new to trading, it’s easy to get confused by the differences between investing and trading. Here’s one way to think about it.

When you invest, you are buying an asset that you believe will appreciate over the long term. When you trade Forex, your goal is to make a profit based on exchange rate fluctuations in the short term. While some exchange rates may not differ much in the long run, you can still make a profit if you can successfully capture price volatility in the short term.

Just as there are many stocks to choose from, there are also multiple currency pairs to trade. Popular pairs include EUR/USD, USD/JPY and EUR/GBP.

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Always keep in mind that different currency pairs show different types of behavior. A trading strategy that works well for one currency pair may not be suitable for another.

Another area that new traders tend to overlook is the important macroeconomic policies that can affect currencies. These include announcements regarding interest rates, fiscal spending and policy updates. These announcements can have a large impact on short-term exchange rate volatility or even cause shocks. So be sure to know when these notifications will be delivered and prepare for them in advance. When in doubt, do not trade during these periods of extreme uncertainty.

Contrary to popular belief, forex trading itself is not really “risky”. Most major currency pairs hardly ever fluctuate 2% to 3% over short periods of time.

Forex trading is more risky because leverage is used. It is common to find leverage around 50:1 for Forex trading. This means that with as little as $1,000, a trader can take a position of up to $50,000.

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In this example, a 1% move in the currency would mean your position is now at $50,500 or $49,500. This means a 50% gain or 50% loss of your $1,000 capital. This highlights that while a 1% movement in currency prices may not seem significant, leveraging up to 50:1 can result in a 50% gain or loss of capital.

During volatile periods when currency pairs can swing wildly, it is possible for traders to suffer losses that exceed their initial capital outlay. This makes Forex trading dangerous if traders cannot adequately manage the risks they are exposed to.

Many people are attracted to Forex trading because of the possibility to make a profit with only a small capital outlay. However, at the same time, we should not focus only on the profits we hope to make while ignoring other important aspects of Forex trading.

If you are new to Forex trading, we strongly recommend that you test your strategies with a demo account first. IG allows you to practice trade with $100,000 in virtual funds, giving you the opportunity to familiarize yourself with trading and feel confident before you decide whether to put real money into your trades.

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This article was sponsored by IG, the world’s #1 CFD provider (by revenue excluding FX, 2016). All views, opinions and recommendations expressed in the article are independent opinion and do not in any way reflect the views, opinions, recommendations or recommendations of IG Asia Pte Ltd (Co. Reg. No. 20051002K) (“IG”). The information is for educational purposes only and does not constitute any form of investment advice or an offer or invitation to invest in any financial instrument. IG shall not be liable for any loss or damage whatsoever (including negligence) of any person acting or refraining from acting as a result of such information or material.

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Life Hacks 7 platforms in Singapore to buy your favorite items so you can save the country and money when shopping CFDs are comprehensive tools. 75% of retail client accounts lose money when trading CFDs with this investment provider. With leverage, you can quickly lose your money. Make sure you understand how this product works and whether you can afford to risk losing money. CFDs are complex tools. 75% of retail client accounts lose money when trading CFDs with this investment provider. With leverage, you can quickly lose your money. Make sure you understand how this product works and whether you can afford to risk losing money.

When you learn how to trade FX, it’s not hard to see why it’s such a popular market among traders. You will find that there are a huge number of different currency pairs that you can trade – from majors to emerging currencies to exotics – 24 hours a day. Learn how to trade forex with CFDs as a forex broker, how the forex market works and see an example of a forex trade.

Call +44 (20) 7633 5430 or email sales.en@ to discuss opening a merchant account. We are here 24 hours a day, except Saturday from 6:00 AM to 4:00 PM (UTC+8).

Forex Trading Down Under

Learning to trade any market can seem difficult, so we’ve broken down forex trading into a few simple steps to help you get started:

Many forex trades take place between large banks and financial institutions that buy and sell huge amounts of currency every day. However, for individual traders who do not have the resources to trade billions of dollars in forex, there are two main ways to get involved: forex CFDs or forex trading through a broker.

A Forex CFD is a contract in which you agree to exchange the difference in the price of a currency pair from the moment the position is opened until the position is closed. Open a long position and if the price of the forex position increases, you will make a profit. If the price goes down, you will suffer a loss. Open a short position and the opposite is true.

Forex trading through a broker – or sometimes through a bank – works very similarly to CFD trading. You speculate on the price movements of currency pairs without actually taking ownership of the currencies themselves. If you think the price of a currency pair is going down, you can go short instead of long.

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What I Need To Know About Forex Trading