Placing a Forex trade is simple and easy and the mechanics is same as you find it in other markets like stocks, commodities and etc. So if you have a prior knowledge of trading in financial markets it is very easy for you to understand how to trade Forex. But if you do not have any experience, learning how to trade Forex with XTrade is easy and you will be able to pick up pretty quickly.
What is the objective of Forex trading?
The objective of Forex trading is to exchange one foreign currency with another expecting that the price will change and you can benefit with the change in the currency prices. The currencies always change in prices and therefore traders at XTrade find it easy to make speculations and predict the future change in prices in a particular direction. So, in order to learn how to trade Forex , various factors have to be taken into account. Some of them are government economic policies, interest rates, big social, political and other events in the country related to the currency has effect on the fluctuations of currencies being traded.
How to trade Forex with an example
Let us have a quick understanding of the concept related to how to trade Forex. For example- You purchase 10,000 Euros with the exchange rate of EUR/USD pair- 1.18. So total USD you spent is 11800. Now you expect the exchange rate to move upwards and after a week it goes 1.25. Now you purchase dollars back by selling 10000 Euros you have and the dollars you get is 12,500. So your profit becomes 12,500-11800 = 700 dollars.
Reading a Forex Quote
Foreign currencies are always quoted in pairs in your XTrade account – such as Euro/USD, GBP/USD and others. The reason for quoting in pairs is that you are simultaneously buying one currency and selling others. An example is GBP/USD which is British pound VS US dollars. The first currency GBP is called base currency (British pound here) while the second one on the right is called counter or quote currency. The rate is for example GBP/USD- 1.51 which means 1.51 USD is needed to buy 1 GBP.
All the quotes are quoted in 2 prices bid and ask. For most of the time, bid is lower than the ask price. The bid is the price at which your Forex broker is ready to buy the base currency in exchange of quote currency. The ask price is the price in which XTrade will sell the currency in terms of quote currency. Another term used for the ask is offer price.
It is important to understand how to trade Forex effectively and to make the traded profitable. There are many risks involved in Forex trading and it includes volatility in the market during certain periods and risks of excessive leverage. A smart Forex trader is the one who can manage the money as well as risks effectively using various strategies and tips. Invest in forex and make good money