Forex Trading

What is Forex trading?
Forex (Foreign Exchange)is a trading/transaction that trade currency of a country against another country’s currency that involved main currency trading in the world for 24 hours straight (please refer to trading hours).
The Forex trading is open in New Zealand and Australia beginning at 5.00 – 14.00 WIB, direct to Asia’s Japan, Singapore and Hong Kong that begins at 07.00 – 16.00 WIB, then followed by Europe’s Germany and UK that begins at 13.00 – 22.00 WIB, followed by America’s market from 20.30 – 10.30 WIB. History reveals that even central bank that owned by biggest foreign currency countries can be beat by the power of forex market.
According to BIS (Bank International for Settlement – world’s central bank) survey that had taken place at the end of 2012 the value of forex market trading achieved more than USD$1.4 Trillion per day. This proves that prospect of investing in virtual forex is very good.
Based on liquidity and how active the movement of high price, FOREX is also a popular alternative because ROI (Return On Investment or the revenue of investment that we have invested) and profit received more than the trade value generally (the average return more than 5% - 10% per month, it’s possible to get more than 100% per month for professional trader). FOREX is very risky because of the fast movement if you don’t have enough knowledge and ability to manage finance wisely.
Most of the currency traded are US Dollars, Pound sterling, Euro Yen, Franc Swiss, Dollar
Australia, Dollar Canada and Dollar New Zealand.

How a Forex Trade Get Revenu?
The revenue in forex trading is based on the last value of a pair of currency. The movement of the value is called PIP. For example, let’s say you want to trade EUR/USD currency. The selling price is 1.2035. Let’s say the price goes up to 1.2065 in 30 minutes. It means that you gain revenue of 30 PIP or point. One PIP will entitle you to a revenue value of US$10 based on the capital that you have invested. If you get revenue of 30 PIP, it means that you have gained US$300 in 30 minutes. If exchanged in Ringgit, you will gain around RM1,200 in only 30
minutes.

What is pip?
PIP means point. The word PIP is used by traders during transactions. How pip or point is counted? A pip is the last decimal place of a quotation. The Pip or Point as it is sometimes referred to depending on context is how we will measure our profit or loss.As each currency has its own value it is necessary to calculate the value of a pip for that particular currency. Let’s say you are trading GBP/USD currency at the opening price of 1.8750 and there has been a raise to 1.8800. It means that the GBP/USD pair has raise up to 50 points or pip.
Point/Pip in the USD value for majors currency:
Currency Regular Mini
EUR 10$ 1$
Pound 10$ 1$
AUS 10$ 1$
CHF 7.60$ 0.76$
CAD 7.30$ 0.73$
Yen 8.45$ 0.84$



What is leverege?
Leverage means ‘guaranteed margin’. For example if you have a capital in forex trading or stocks of 100usd. If one leverage charge is 1:100, it means that you have been given a right by a forex platform to buy 100 times larger than the capital that you have. It means that with value of 100usd you can be given a capital of 10,000usd. With this capital investment you can do transactions at a larger trading volume.
Every forex platform offers its own leverage. In this case the larger the leverage, the bigger profit
or loss. The smaller the leverage, the profit and loss is smaller. Below is an example of leverage:-
Leverage 1:100
Capital 100usd
Allowed investment 100usd x 100 = 10,000usd

What is contract Size?
Contract size is a digging factor in estimating the profit or loss. The value is fixed by a country at
the value of 10,000.

What is lot?
Lot is a contract in every transaction that you want to do. If I want to do a currency trading, let’s
say I buy EURO against USD, an opening value of the transaction will be stated in lot. Every
forex platform has a different lot value. Some has bigger opening lot value and some has smaller
opening lot value.

What is the spreads
In the currency markets It is the difference between BUY and SELL, or BID and ASK. Basically,
this is the difference between the market maker's "selling" price (to its customers) and the value the market maker "buys" it from its clients. If an trader buys a currency and immediately sells it (and thus there is no change in the rate of trade), the trader will lose money. The reason for this is “the spread”. At any given moment, the amount that will be received in the counter currency when selling a unit of base currency will be lower than the amount of counter currency which is required to purchase a unit of base currency. For instance, the EUR/USD bid/ask currency rates at your
bank may be 1.2015/1.3015, representing a spread of 1,000 pips (percentage in points; one pip = 0.0001). Such a rate is much higher than the bid/ask currency rates that online Forex traders generally encounter, such as 1.2015/1.2020, with a spread of 5 pips. Generally, smaller spreads be more effective for forex traders since they require a smaller movement in currency rates in order to profit from a trade.

What is the Margin?
Brokers, Banks and or online forex trading companies require guarantee to be sure that the trader can pay in the event of a loss. The collateral is called the “margin” and is also known as minimal security in Foreign Exchange markets. In practice, it is a deposit to the trader's account that is intended to cover any currency trading losses in the future.
Margin permits private traders to trade in markets that have high minimal units of trading, by allowing traders to hold a much larger position than their account value. Margin trading also enhances the amount of profit, but similarly enhances the rate of loss, beyond which taken without leveraging. 





Forex Trading Quiz

1. What is Forex market?
  • Is the largest financial market in the world
  • Futures Fx Markets Exchange
  • Options FX Markets
2. What is the spread?
  • The difference between the bid and the ask
  • The minimum value of the currency pair
  • The difference between open and closed price
3. What is the first currency in the pair?
  • The numerator to calculate the ratio
  • The first currency is the counter or quote currency
  • The first currency in the pair is referred to as the base currency
4. What is a pip?
  • It's the first decimal place of a quotation.
  • A pip is the last decimal place of a quotation.
  • It's the second decimal place of a quotation
Score =

Correct answers:

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