“Financial Market”– The process of trading in this market is similar to other markets, especially the stock market or the capital market. So if you have any previous trading experience in the capital market, it will help a lot to trade in this market. The main purpose of trading in this market is to buy another currency in exchange for one currency in the hope of increasing in value in the future. More specifically, the currency that has been purchased will increase in value in the future compared to the currency that has been sold Forex .
How to understand Forex Quote?
In this market, coins are always presented in pairs. The reason is that buying one coin means selling another coin in return. The currency signal on the left of the pair is called the base currency and the currency signal on the right is called the quote currency. The exchange rate at the time of purchase will tell you how much you have to pay in exchange for a currency. In other words, at the time of sale, this exchange rate will show you how much quote currency you are getting if you sell the base currency.
Whether buying or selling, the base currency serves as the basis for this transaction.
* You will only buy a pair when you realize that the base currency will outperform the quote currency in the future.
* On the other hand you will sell a pair only when you have the idea that the base currency is less valuable than the quote currency.
Long / Short:
First, you have to decide whether you will buy or sell any currency pair in this current session. If you decide to buy, you will have to wait a little longer for the quality of the base currency to improve or increase from the time of purchase to the time of sale, which is of course time-consuming. Due to the time constraint, this type of purchase is called Long Position in the language of traders. So if you decide to sell a currency, you will have to wait for the base currency to depreciate-which is known as “Short Position” in this Forex market.
Bid, Ask, and Spread:
Currency pairs are usually represented by price in the price list. One of them is called ask price and the other is called bid price. The bid price is the price at which your broker is interested in buying the bid currency against the quote currency. On the other hand, ask price is the price at which your broker is willing to sell base currency for the purpose of buying quote currency. On the other hand, ask price is the price at which your broker is willing to sell base currency for the purpose of buying quote currency.
Meanwhile, the difference between bid and ask price is called spread. The bid price in the mentioned EUR / USD pair is 1.34568 and the ask price is 1.34588 while its spread is .00020.
* In this case if you want to sell you can get it at 1.34568
* On the other hand, if you want to buy, you can get it at 1.34588
When to buy or sell a currency pair:
To make this decision we need to use Fundamental Analysis.
EUR / USD: EUR is the base currency in this pair, which is the main basis for buying or selling this pair. Analyzing the situation, if you think that the US economy will go down in the future, you can decide to buy this pair. In other words, you have bought the euro against the dollar in the hope that it will rise further against the dollar in the future.
USD / JPY: On the other hand, if you buy this pair, then USD will be the base of this pair. If you think the Japanese government will devalue the yen against the dollar to boost its export-oriented economy, you can place a buy or buy order on this pair. To do this you have purchased US dollars in the hope that it will increase in value in the future Forex.
On the other hand, if you see Japanese investors pulling their investments out of the US financial market and converting the US dollar they hold into Japanese yen, you can place a sell order on this pair if you wish as in your analysis, the value of Japanese currency will increase against the US dollar.
For example, if you buy 1,000 euros in today’s market, there is a possibility to reduce the good profit. But the question is where you have got such an amount so that you can buy 100 Euros. Does this mean that you should refrain from trading this? This opportunity will be without hands? The simple answer is ‘no’, this opportunity will not go unnoticed. Margin trading is one of the significant factors in Forex market which refers to investing more than your own capital with borrowed money. In such a way, you can make big transactions in the market very easily and very quickly with little capital. Let’s see some illustrations for clear conceptions:
1. Looking at the dynamics of the market, you may think that the British currency, the pound sterling, is going to do better than the US dollar.
2. Suppose, you open a standard lot. As a result, you have to buy British pounds at a margin of 2%. Now, when you buy 100,000 units of the pair at a price of 1.50000, you are buying 100,000 pounds which are valued at 150,000. If the margin is 2% here, your broker will set aside হিসেবে 3,000 for you so that you can start trading. As a result, you can trade 100 100,000 for just 3,000 with an actual market value of 150,000.