Jayden Forex trading is shorthand for foreign exchange and refers to the act of people exchanging the currency of one country for the currency of another for the purpose of international trade.
Typical situations are payments for the import and export of goods and the sale of goods or services between countries. The foreign exchange market is also known as the cash market or the spot interbank trading market. The spot market is where transactions are made instantly, regardless of the current price level.
Forex trading is a forex currency or a means of payment expressed in a forex currency that can be used for international settlement.
Forex currency is not necessarily always forex trading. Whether a forex currency can be called forex trading depends on whether it is freely convertible, or whether can back to its country and can be deposited without restriction into the general account of any account of the country’s commercial banks, and can be transferred at any time when required. Only then this forex currency can be called forex trading.
At present, the main forex currencies traded on the international market are the US dollar, the euro, the Japanese yen, the British pound, the Swiss franc, the Canadian dollar, the Australian dollar and the New Zealand dollar.
Prior to 1994, the retail interbank foreign exchange market was not open to individual speculators or small traders. A speculator or speculative trader is a trader who profits from short-term price fluctuations in the market, but does not hold any currency for a long period of time.
In the late 1990s, retail forex market brokers (companies that facilitate speculative traders) were allowed to split large interbank currency units, thus offering individual traders the opportunity to participate in the forex market, as we are accustomed to doing today.
The foreign exchange market is recognised as the largest financial market today. The concept of a market refers to a place where buyers and sellers come together to trade. In contrast to the foreign exchange market, where daily trading volume is no less than $1.5 trillion, the daily volume of the U.S. long-term Treasury market is $300 billion, and the U.S. stock market is $100 billion per day. Combined, this is about $400 billion per day. The volume of trading in the foreign exchange market is nearly four times their combined volume and exceeds the volume of all other financial markets combined.
The forex market has no physical venue, and foreign exchange transactions are done over the Internet or by phone. Still, this market consists of close to 4,500 large international banks and forex retailers. Individual traders who wish to profit from the movement of the exchange rate can only participate in the forex market through forex dealers. For speculative traders, it is wise to choose those formal forex dealers that are regulated by their respective national governments.
Currency trading involves the fluctuation of the price of one currency relative to another, and this is the main difference between currency trading and stock trading. In forex trading, you are trading two, or rather a currency pair, unlike in stock trading where there is only one. The definition of a currency pair, or currency group, represents the ratio of one currency to another, and in the forex market, you need a pair of currencies to complete the trade. Forex speculative trading is like stock speculative trading, where you exchange one currency for another to make a profit when the price moves in the direction you expect.
There are two types of traders, one is called a long term trader and the other is called a short term speculative (short term) trader.
Long term traders tend to hold for the long term and are not sensitive to daily price movements, as opposed to short term traders who are only concerned with daily price movements, and that is where their potential profits lie.
Short term traders are also known as “hat grabbers” or “scalping traders”, who try to “grab” profits from small price movements.
Long-term traders often enter the market and hold it for more than a week, a month or several years. Short term or day traders will only stay in the market for 5 minutes, 30 minutes or 4 hours and then liquidate their positions, rarely holding them for more than 24 hours.
Although the forex broker assures you that there are no commissions on forex trading, you need to understand that there are still other fees here, and that is the spread, which is the cost of your entry into the market. The spread is the difference between the bid price and the asking price of a particular currency.
Try to imagine you are at an auction and several people want to buy a specific item. The auctioneer wants to sell it for $10, and he starts asking people to bid on it. One person offers $4. So the difference between the $4 buy price and the $10 sell price is $6. That’s the spread. As the buyer’s offer gets closer to the seller’s sell price, the spread gets smaller. When the buyer offers $9.95, the spread is $0.05.
When the buyer agrees to offer $10 and the seller agrees to sell at that price, a deal is struck. Each currency pair in the forex market has a spread. The average spread for major currencies such as the U.S. dollar (USD), British pound (GBP), Japanese yen (JPY), euro (EUR), and Swiss franc (CHF) are 3 to 6 pips. Currencies of smaller countries are called “marginal currencies” and their spreads are usually as higher.
When a trader enters a trade, the broker charges the spread, which is the difference between the bid and offer price. This spread is deducted from your account whether or not the market is moving in the direction of your trade. For example, if the asking price is 4 pips lower than the bid price, which is $40, when you buy a set of currency pairs and then immediately sells them, you will lose $40, or 4 pips, without any change in price. So the market has to rise by at least 4 pips for you to get out of the market flat, and to have a profit the market has to rise by more than 4 pips.
