When it comes to the world of foreign currency (forex), most people are not familiar with forex how transactions are made.
Unlike buying and selling stocks, the process of forex trading does not take place more central to the conflict such as the Singapore Exchange (SGX). Instead of market participants buying and selling currencies through what is known as over-the-counter (OTC) Markets. That the customers find a reliable broker to provide them with access to the market and buy and sell currency through them.
How forex trading works?
Forex trading refers to the exchange of currency pairs. For example, market participants can choose to trade the US dollar (USD) Euro, if they believe that the euro will achieve better results compared to the U.S. dollar over the long term.
As there is no central conflict, which governs the change of the dollar against the euro (ie you can trade for these currencies in any place you want), or any of the other currency pairs in this regard, the customer or the business can choose to go to any broker they trust to give them competitive rates and quality service.
To start forex trading, you will need to pre-fund accounts with brokerage provider that you have selected. The brokers then provide you with leverage so you can trade a contract size that are larger than the amount that you have developed.
For example $ 1000 pre-funded account can allow to get up to 50:1 leverage on major currency pairs. This means that the trader is able to eat currency position of up to $ 50,000.
Read also: what is leverage trading?
How does the spread look?
Differences of supply and demand that forex brokers offer to resemble what you will encounter in traditional moneychanger.
For each currency pair on the show, there will be a “sell” and “buy” column. This shows the prices which forex brokers like IG will be buying and selling currencies.
The prices offered by online brokers usually live. This means that they are able to deliver a much smaller spread since the live updates allow them to make adjustments to the immediate throughout the day compared with traditional money changers who had only one published rate every day.
Calculate the cost per page on the spread of foreign currency trading
It’s easy to get confused about how to forex a must read. Let’s try to explain it in the simplest way possible.
Our example – EUR/USD:
Work in front of the (EUR) currency basis. The second currency listed in the back (USD) currency pricing. The “buy” and “sell” values that you see how much it costs, where to buy the base currency.
EUR/USDWhat does it meanSell1.08871If you can sell the euro you will receive USD 1.08871 per 1 € sellBuy1.08877If buy euro, you pay $ 1.08877 per 1 € buyDifference0.000060.0001 = 1 point
0.00006 = 0.6 point
The difference between “sell” and “buy” rate is called the spread. In this example, the spread of this IG provide EUR/USD 0.00006 or 0.6 points, which is one of the lowest rates in the market.
If you are familiar with forex, I quickly realized online small wait, compared to what you are used to seeing from banks or exchange offices that can easily be 100 or more points for each dollar exchanged.
Forex trading traders tend to handle large amounts of money in each trade. For example, based on a 0.6 pips spread we see above, the $ 10,000 can turn transaction cost of about $ 0.60. $100,000 position, also known as one contract supplier, you may bear transaction costs of $ 6.