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.
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.
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