What is currency trading, Where to trade currency, and How to trade currency?
By Daniel at 12 July, 2009, 7:46 pm
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What is currency trading?
“In finance, the exchange rates (also known as the foreign-exchange rate, forex rate or FX rate) between two currencies specifies how much one currency is worth in terms of the other. It is the value of a foreign nation’s currency in terms of the home nation’s currency.” –Wikipedia
Currency trading is similar to stock trading and all technical and fundamental analysis is approximately the same. You have to know that currency pairs always go up and down.
Where to trade currency?
Currency trading platform, Anywhere in the world
All you need is a computer and internet connection
“We’re focused on the only person who counts.
You.
5. Work is serious and fun.
We’re casual and approachable.
But disciplined and professional.
6. We’re always available for you.
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Commission free trading?
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Yes - no commissions
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Commission free deposits and withdrawals?
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Yes - no fees
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Islamic account terms
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Yes (no renewal fee)
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Orthodox-Jewish account transaction permit
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Yes
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Renewal procedures and (rolling) Fees
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0.01%-0.03%
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How to trade currency?
Buying and Selling
Foreign Exchange (or Forex or FX) is the buying or selling of one currency against another currency. All trades result in the buying of one currency and the selling of another, simultaneously.
In forex trading, you place an order to buy (go long) or sell (go short) the first currency in a currency pair at current exchange rates.
Buying
Buying a currency pair implies buying (longing) the first (base) currency and selling (shorting) an equivalent amount of the second (quote) currency to pay for the base currency. For example, buying EUR/USD means that you are buying Euros (EUR) using US Dollars (USD).
It is not necessary for the trader to own the quoted currency prior to selling, as it is sold short. A speculator buys a currency pair if she believes the exchange rate for the base currency will go up relative to that for the quote currency (that is, the value of the pair will go up).
Selling
Selling the currency pair implies selling (shorting) the first (base) currency and buying (longing) an equivalent amount of the second (quote) currency to buy the base currency. For example, selling EUR/USD means that you are buying US Dollars (USD) using Euros (EUR).
A speculator sells a currency pair if she believes the base currency will go down relative to the quote currency, or equivalently, that the quote currency will go up relative to the base currency.
Placing an Order
When you request to buy or sell a currency pair, you place an order (also called “opening a trade”) so that you “take a position”) based on the exchange rate at the time. Right after you place an order, the value of the position will be close to zero, because the value of the base currency is more or less equal to the value of the equivalent amount of the quote currency. (In fact, the value will be slightly negative, because of the spread involved.)
As time goes on and exchange rates change, the value of the position will evolve to be profitable (or not). When you eventually decide to take a profit or stop a loss on the position, you “close” the trade. When you close the trade, Profit/Loss is calculated from the difference between the exchange rate at the time you opened the trade to the time you closed it.
Examples
Suppose EUR/USD = 1.5000, and you sell 10,000:
* Your base currency position is 10,000 EUR
* Your quote or counter currency position is 10,000*1.5000=15,000.00 USD
Let’s say, hypothetically, that there is political turmoil in Japan. If you believe that the Yen will depreciate as a result of this turmoil, you have the following outlook:
* It is a good time to be long (buy) USD
* It is a good time to be short (sell) JPY
If you think the USD/CAD will move up:
* You are bullish on the USD
* You believe the USD/CAD is undervalued
* You want to be long USD/CAD
Source: FXTrade
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