Learning the Forex basics is important for every Forex trader who is a beginner at XTrade. Learning Forex trading and its basics is similar to learning a new language. There are new terminologies, concepts and other technical things which are important to understand in Forex. Before you move on to learn the advanced level of Forex trading, your the basics should be clear. Let us know the basics of Forex trading here.
Forex basics – What is Forex?
The commonly used abbreviation for Foreign exchange is Forex. Forex trading relates to the buying and selling of currencies in the Foreign exchange market which is done specially the investors and the speculators. A popular expression is ‘buy low and sell high’ which applies to the currency trading. A trader buys the currencies which are undervalued and sells currencies which are overvalued. Forex market is the biggest financial market and the total turnover in a day is in trillions of dollars. These are Forex basics you have to be familiar with.
Reading a quote
An important part of learning Forex basics is reading a Forex quote. In your XTrade account, you will notice that Forex is always quoted in pairs since we trade a currency in the relative prices and compare one currency with another. A good example of a Forex currency pair is EUR/USD. The EUR/USD at 1.200 means that how much EUR is worth in terms of US dollars which mean here that 1.2 USD can be exchanged with 1 Euro at the present price.
What is a lot size?
The smallest trade size available is called a lot in Forex. A popular lot size is 1000 currency units. There are other sizes in which the account holders can place the trades which are 2000, 3000, 15000 etc.
Using Leverage While Trading At XTrade
Another important thing while learning the Forex basics with your XTrade account is the leverage feature. Today most of the Forex brokers offer the facility of leverage which means trading with a small fraction of total trade money as margin deposit. For example your broker offers you the leverage ratio of 100:1 which means that you have to deposit only $10 as the margin deposit in order to trade with $1000 as the position money. This allows you to take the advantage of even the smallest movement in the currencies by controlling more money in the market than the money you have actually in your account.
So you are able to magnify your gains and can earn a good amount of money as profit if the market goes favorable for you. On the other hand the opposite can also occur and if the market goes against you, your loss will be in the same ratio as you expected the gains. That is why it is recommended to take Leverage with caution in the Forex trading and avoid taking excessive leverage at XTrade without having any control over your money and trades.