Forex Trading Deal

One of the important things you must know about trading forex before you start trading is how the deal will be, its components, rates, prices, orders, and other things traders use. We will also talk about margin, spread and leverage because it will help you to know who much money you need to trade.

Who Trade Forex? More than 95% of forex trading performed in forex market are for speculative proposes, from people trade the currencies just to make money, they don't care about if the currencies values goes up or down, all what they care about is to make money by the prices changes. 

Less than 5% of the trades in forex market used for hedging proposes by governments and other proposes

Forex Deal Components

The Currency Pair Trading in forex come in pairs you buy a currency using another currency, in this example EUR/USD you buy euro using USD dollar, you can make this deal using your account whatever your account currency is.

The money amount you mean to invest in this trade, you will need $1000 to buy one lot, or $100 for mini lot.

The Exchange Rate is the same rate that use when exchange money in banks or money exchange shops but the big difference here come with the importance of fractions because its multiplied in forex.

Leverage leverage 1:100 will multiply your earning by 100, lets say you trade USD/CAD with $100 the price is 1.06 if the price change to 1.07 the 1 cent change in normal case will make you 1 cent for each dollar, so with $100 this change will make you 100 * 1 cent = 100 cent only $1 single dollar but with forex and leverage 1:100 this change will make $100 and with leverage 1:200 this change will make you $200 with $1000 invest this change will make you $2000 and so on.

Margin is the money you deposit in your account to be to cover any losses in the future. It's used to ensure that the investor can pay in event of loss it's also know as minimum security in forex market.

Trading Forex Prices (Quotes) Quotes are used is the price of currency in term of other currency, quotes types are: Direct Quote is the price of 1 US dollar in term of other currency, e.g. USD/CAD Indirect Quote is the price of 1 unite currency in term of US dollar, e.g. GBP/USD Cross rate any quote which is not against the US dollar.

What are Major Pairs? Now one can tell what are the best trades to trade but we can tell you about the major pairs because they are the most traded in the market: EUR/USD Euro , GBP/USD  Britches pound, USD/CAD Canadian, USD/CHF Swiss frank , USD/JPY Japanese yen.

Simple Trading Scenario You open mini account online and deposit $2000 - you buy one mini lot $100- pair EUR/USD - at rate 1.4500 - after 1 hour you sold that pair at changed rate 1.4600

The change in the price from 1.4500 to 14600 is 100 point (pip) and that will make: (The amount of the mini lot) $100 * (The change in the price) 0.01 * (Leverage 1:100) 100 = $100 * 0.01 * 100 = $100 profit.