In this article, we will see how does forex trading works. As we all know Forex is a highly volatile market which works 24/7 across the globe. This market works Monday to Friday in different time zones of the country. The normal volume every day turnover is around $5 trillion. This much huge volume is only into forex market. This much high volatility is only into forex market.
So it clearly shows that as a market it is too huge so it will be having huge traders as well.
If you are a forex trader then you will have noticed that all currencies are quoted in pairs. A Forex Pair consists of Base currency and quote currency. The base currency means that in the base currency you can purchase the quote currency.
It means that 1 EUR equals to 1.14 USD.
You’ve probably already noticed that all currencies are quoted in pairs. A Forex pair consists of the base currency and the counter currency, and the exchange rate represents the price of the base currency expressed in terms of the counter currency.
Now the ultimate goal why are we working to understand the how forex works are the profitability.
And if we talk about the profitability then the Forex
(a) Base currency and Quote currency- All currencies are quoted in pairs. In the pair one currency is bought and another one is sold. It is presumed that the currency which is bought is estimated to raise its price and the currency which has been decided to sell is assumed that it will lose its price.
In the pair, the first currency is called base currency and another one is called the quote currency.
For example, if EUR/USD is the currency pair then the Euro is Base currency and the USD is Quote currency.
So this is how forex trading works.
(b) Spread Charges- The difference between ASK and BID is called spread. It represents brokerage service costs and replaces transactions fees.
(c) Pips- Pips is the moment only the profits are measure into pips only.
(d) Leverage- Leverage is the liberty provided by the broker to the traders without engaging excess capital.
(e) Lot size- Lot is the size of the trading volume of the currency pair. There is certain Lot size are available in the market in which you can trade in different lot size. Micro Lot size, Mini lot size, and standard lot size.
Profits are the ultimate goal of forex trading. If there are no profits then none will work to trade into this highly volatile and risky market. The profits are in the pips by which the traders calculate their risk and profits.
If we talk about Forex then we need to understand that the trading we do is in the forex market with the capital investments in the market.
We need a trading platform and a brokerage account. Opening a brokerage account is pretty simple brokerage account can be acquired by filling the form on any brokers website, Now make it sure that you open an account with an authorized broker and a trading platform.
And he it goes you can deposit the capital into your account in few minutes and can start trading.
If you are a beginner in this market then you should trade on a demo account first to understand how trading takes places. While working on a demo account you will be able to understand how does forex trading works and what are the steps you need to take for a successful Forex trading.
The currency market is an OTC (over-the-counter) market there are certain trading sessions are into the market which are New York session, the London session, the Sydney session, and the Tokyo session in the major trading sessions the forex is traded.
The forex market works 24 hours in the working days which is Monday to Friday.
This is how Forex trading Works. Forex Trading is itself a huge business only we need to understand that how does this market work and how to deal with it.