Learn currency trading from the experts! At Online Trading Academy, we break down the online forex trading experience into multiple courses based on your level of expertise. We can help establish the fundamentals of online currency trading for the new trader, or refresh advanced principles with a more experienced investor. Trade forex online on your own schedule with markets open 24 hours a day, five days a week. Our expert educators can help you implement your own forex trading strategy based on live streaming data and analysis.
All forex trades involve two currencies because you're betting on the value of a currency against another. Think of EUR/USD, the most-traded currency pair in the world. EUR, the first currency in the pair, is the base, and USD, the second, is the counter. When you see a price quoted on your platform, that price is how much one euro is worth in US dollars. You always see two prices because one is the buy price and one is the sell. The difference between the two is the spread. When you click buy or sell, you are buying or selling the first currency in the pair.
Analysis is absolutely vital to trading. Charts are helpful for both short and long-term trading. You should be looking at daily, weekly, and monthly charts. Fortunately, there are a number of different approaches to Forex analysis, which means every trader can find the right approach for them. The three broad categories of Forex analysis are fundamental analysis, technical analysis and wave analysis.
The world then decided to have fixed exchange rates that resulted in the U.S. dollar being the primary reserve currency and that it would be the only currency backed by gold, this is known as the ‘Bretton Woods System’ and it happened in 1944 (I know you super excited to know that). In 1971 the U.S. declared that it would no longer exchange gold for U.S. dollars that were held in foreign reserves, this marked the end of the Bretton Woods System.
Cross Currency Pairs signifies secondary currencies traded against each other and not against the U.S. dollar. Examples include Euro vs. the Japanese Yen (EUR/JPY) or the British Pound vs. Swiss Franc (GBP/CHF). Most reputable brokers offer this category of trades, and it’s especially important for a forex trading account denominated in a currency other than the U.S. dollar, or for more advanced traders capitalizing on discrepancies between other economies.
Decide how you will finance your trading in advance: Only one kind of money is good for investing, and that's the kind that you are willing to lose, and preferably without damaging your physical and/or mental wellbeing in the process. Every profitable trader is profitable in their own way, while every loser experiences losses exactly the same way. Remember, use every available opportunity to learn. It's a never-ending process!
By shorting €100,000, the trader took in $115,000 for the short-sale. When the euro fell, and the trader covered their short, it cost the trader only $110,000 to repurchase the currency. The difference between the money received on the short-sale and the buy to cover is the profit. Had the euro strengthened versus the dollar, it would have resulted in a loss.
Use leverage wisely: As we've already mentioned, Forex CFDs allow you to trade on a margin, or by using leverage. However, just because 1:30 (or 1:500) leverage is available, it doesn't mean that you need to use it. At Admiral Markets, while there is a maximum amount of leverage available to our clients, they are still able to choose the amount of leverage they use when they are trading, which may be anything up to that amount.
The second tier is the over-the-counter market. That's where companies and individuals trade. The OTC has become very popular since there are now many companies that offer online trading platforms. New traders, starting with limited capital, need to know more about forex trading. It’s risky because the forex industry is not highly regulated and provides substantial leverage.
As mentioned earlier, in a long trade (also known as a buy trade), a trader will open a trade at the bid price, and will aim to close the trade at a higher price, making a profit on the difference between the opening and closing value of the currency pair. So if the EUR/USD bid price is 1.16667, and the trade closes at the price of 1.17568, the difference is 0.00901, or 90.1 pips. (When trading a single lot, that would make a 901 USD profit).
Currencies are always traded in pairs, so the "value" of one of the currencies in that pair is relative to the value of the other. This determines how much of country A's currency country B can buy, and vice versa. Establishing this relationship (price) for the global markets is the main function of the foreign exchange market. This also greatly enhances liquidity in all other financial markets, which is key to overall stability.
Diversify your portfolio: We all know the saying, 'don't put all your eggs in one basket', yet many new FX traders do this when it comes to their trading. Just as it isn't wise to put all of your funds into a single trade, relying on a single currency pair increases your level of risk, because if the pair moves in a different direction to what you expect, you could lose everything. Instead, consider opening a number of small trades across different Forex pairs.
In the futures market, futures contracts are bought and sold based upon a standard size and settlement date on public commodities markets, such as the Chicago Mercantile Exchange. In the U.S., the National Futures Association regulates the futures market. Futures contracts have specific details, including the number of units being traded, delivery and settlement dates, and minimum price increments that cannot be customized. The exchange acts as a counterpart to the trader, providing clearance and settlement.