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The Basic of Currency Trading

Currency Trading is the act of buying and selling different currencies of the world. It is the market that allows to trade currencies in volume.

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The Basic of Currency Trading

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  1. The Basic of Currency Trading

  2. Index • What is Currency Trading • How does it work • What Currencies are traded • Pairs and Pips • Bid/Ask Spread • Leverage

  3. 1. What is Currency Trading • Currency Trading is the act of buying and selling different currencies of the world. • The Foreign Exchange is the market that allows you to trade currencies in volume.

  4. 2. How Does It Work • It's the largest financial market in the world, trading around a $4 trillion each day. • Forex market is open for 24 hours a day. • It provides an excellent opportunity for traders to trade at any time of the day or night.

  5. However, when it seems to be not so necessary at the beginning, the right time to trade is one of the most important points in becoming a successful Forex trader.

  6. 3. What Currencies are Traded • Forex always involves two currencies: • One currency is being bought in exchange for another currency. • Together the two currencies are called a currency pair.

  7. 4. Pairs & Pips • All the currency trading is done in pairs. Unlike the stock market, where you can buy or sell the single stock, you have to buy one currency and sell another currency in the Forex market. • Next, nearly all of the currencies are priced out to the fourth decimal point.

  8. The pip or percentage in point is the shortest increment of trade. • One pip typically equals to 1/100 of 1%.

  9. 5. Bid/Ask Spread • It is evident for any currency pair to be rated with both a bid and an ask price. • The former, which is always lower price than the ask, is the price at which the broker is ready and willing to buy, which is the price at which the trader should sell.

  10. The ask price, on the other side, is the price at which the broker is ready and willing to sell, meaning the trader jump at that price and buy.

  11. 6. Leverage • In other financial markets, it would be required to have the full deposit of the amount that of which is traded. • In the foreign exchange market, all that of which is necessary would be a margin deposit, with the remainder being granted by the broker.

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