Forex News

The name is a portmanteau of the words foreign and exchange.

We have over two decades of experience in providing innovative products and helping traders achieve their goals. For instance, if the pound is rising against the dollar, you might buy GBP/USD. When you buy this pair, you’re buying pound sterling by selling the US dollar . Then, if the pound continues to outpace the dollar, you can sell the pair to exchange your GBP back for USD and keep the DotBig broker difference as profit. Increase your knowledge and gain valuable insight with our complimentary suite of in-depth educational articles detailing all aspects of forex trading. The name is a portmanteau of the words foreign and exchange. This makes it easy to enter and exit apositionin any of the major currencies within a fraction of a second for a small spread in most market conditions.

By doing so you have bought U.S. dollars in the expectation that it will appreciate versus the Swiss Franc. By doing so you have sold U.S dollars with the expectation that it will depreciate against the Japanese yen.

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For instance, traders tend to set a 1% limit on their trades, meaning they won’t risk more than 1% of their account on a single trade. Varying time periods (long, medium, and short-term) correspond to different trading strategies. Since every currency trade involves borrowing one currency to buy another, interest rollover charges are part of forex trading. Margin trading lets you open large position sizes using only a fraction of the capital you’d normally need. Leverage is the ratio of the transaction size (“position size”) to the actual cash (“trading capital”) used for margin. In this example, the euro is the base currency and thus the “basis” for the buy/sell. In the following examples, we are going to use a little fundamental analysis to help us decide whether to buy or sell a specific currency pair.

  • With more traders wanting euros, EUR/USD could see a rise in price.
  • Keep up to date with our latest company news and announcements.
  • Demand for particular currencies can also be influenced by interest rates, central bank policy, the pace of economic growth and the political environment in the country in question.
  • Although applicable in all markets, day trading strategy is mostly used in Forex.
  • Not every currency is traded all day every day, even with the market being open throughout the week.
  • These brokers will offer you peace of mind as they will always prioritise the protection of your funds.

In our example above, you would want to sell U.S. dollars to purchase British pounds. The exchange rate tells you how much you have to spend in quote currency to purchase base currency.

A Brief History of Forex

If a country has many goods that are in demand, then the country will likely export many goods to make money. This trading advantage will boost the country’s economy, thus boosting the value of its currency.

forex trade

This trading strategy is reserved for more patient traders as their position may take weeks, months or even years to play out. You can observe the dollar Forex index reversing its trend direction on a weekly chart below. Forex scalping is a popular trading strategy that is focused on smaller market movements.

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