Fundamentals of Forex trading

Let’s look at the example of the EURUSD pair …

Trading on Forex exchange market generally follows the simple concept of buying and selling deals.

Let’s recall that we always buy or sell the currency on the left side of the pair, the base currency. This causes the opposite action for the quoted currency on the right side. When purchasing a base currency, we automatically sell the listed currency and vice versa. Let’s look at the example of the EURUSD pair:

Trading on Forex exchange market generally follows the simple concept of buying and selling deals. We can use an example of a property to buy currency pairs. When we buy a house whose value will grow steadily. So if we decide to sell it in a few days, our profit will be the difference between the buying price and the sale – close price. And that’s exactly what Forex is. Predicting the growth or fall in the price of any currency pair in shorter time slots. Let’s say we open trade in a GBPUSD pair, whose price is just 1.2935. The next day, we are going to climb to 1,300 and we will decide to close the currency pair. Our profit is therefore is 65 PIPS. Buying currency pairs is also referred to as taking a long position.

Trading on Forex also allows us to sell a currency pair that we do not own, called short position. How does it work? In short, the basic currency of the couple we want to sell is borrowed from the broker, and if the price goes down, we’ll sell it back cheaper and earn a profit. The process of selling couples that we do not work works as fast as their purchase, so we do not have to worry about any approval process.

Let’s show it on an example of a EURHRK pair at a price of 22,442. If we think the crown will strengthen against the euro and the euro will go down, we can sell this pair we can borrow EUR from a Forex broker. We will find the same pair for 22.422 for a while, so we will sell the EUR back to the broker and earn a profit of 20 pips. However, if the currency pair price was 22,472 at the time of closing the position called sale back, we would lose 30 pips. It is therefore the opposite principle than buying currency pairs.

Trading Forex in a hard business:
-Trade commands are linked to the base currency
-The development of a currency pair after its purchase or sale determines the rate of our profit or loss
-We buy a currency pair and the price will go up, our trade is profitable
-We sell a currency pair that we do not own and the price will go down our trade is profitable
-We must always close the position before reaching a real profit

Leave a Reply

Your email address will not be published.

This website uses cookies. By continuing to browsing the site, you agree to our use of cookies.