• How to trade foreign exchange

    read:2023/2/25 14:01:47


    Currency pairs: base forextradingaccountsregister cashback forex bid currency In the foreign exchange market, traders are always faced with a currency pair, for example: EUR/USD, USD/JPY The currency on the left forextradingaccountstype known as the base currency, while the right is the bid currency, thforex trading accounts is, by the bid currency and the base currency for comparison For example, if the current EUR/USD is 1:1.35, it means that at this time a euro (euro as the base currency) For example, if the current EUR/USD is 1:1.35, it means that a Euro (Euro is the base currency) is worth $1.35 (USD is the base currency at this time) How does leverage work? If you are trading a tangible asset, i.e. you actually hold the currency you are trading in, you are limited by the amount you can invest For example, if you have ￡50, you can only trade ￡50 worth of other currencies and the existence of leverage allows you to trade without being limited by the amount of money you actually have The size of a traders trade will far exceed the size you would normally be able to trade Depending on the risk, each currency pair has a maximum leverage allowed The maximum leverage allowed by ETXCapital varies from currency pair to currency pair, with the lowest leverage being EUR/HUF at 14:1 and the highest being EUR/USD and GBP/USD at 200:1 For example, if I have ￡50 and I want to trade GBP/USD, the size of my capital available at this time is ￡50 200, while the exact amount of the position will depend on the exchange rate at the time. The exact amount of the position will depend on the exchange rate at the time In other words, the existence of leverage allows traders to significantly increase the size of their trades Since traders are able to leverage such a large position with such a small initial investment, the positive and negative effects of leverage are thus reinforced If the trade is executed smoothly according to the initial plan, there will be a great profit at this time However, if the market price moves in the opposite When trading, traders should bear in mind that the greater the leverage, the greater the risk Forex trading: going long or short There are only two options for each currency pair: buying or selling Going long means buying the base currency, that is, selling the bid currency Going short means selling the base currency, that is, buying the bid currency Going long Lets take the EUR/USD as an example to see a long case: consider the following situation: the market is generally worried about the upcoming U.S. GDP data, but also worried about the upcoming elections will eventually favor some of the parties hostile to big business Therefore, you think the EUR / USD or will strengthen, and do more EUR / USD, and the current buy / sell price of 1.6764/1.6770, you decide to take full advantage of the You decide to take full advantage of the leverage, i.e. buy 10,000 euros at 1.6770 with a leverage of 200:1 The following formula is the one that determines how much initial deposit I need to put in: (the amount I want to buy is denominated in the currency exchange rate & divide; leverage size) Therefore, (10,0001.6770 & divide; 200) equals 83.85 euros This is the initial deposit you need to make this If the price then moves in line with your expectations, at which point EUR/USD moves higher to 1.6811/1.6817 and you decide to close your position at this point, i.e. choose to sell your 10,000 euros at 1.6811 to buy at 1.6770 and sell at 1.6811, i.e. the price moves 41 percentage points higher (the price at which I bought - the price at which I sold) the amount I bought amount that is (1.6811-1.6770) 10,000 = $41 However, if in the end the price does not move in my favor, but the dollar strengthens against the euro when the exchange rate touches 1.6720/1.6726, I decide to stop at this point and sell 10,000 euros, then my loss will be as follows: (the price when I bought - the price when I sold) I bought Amount that is (1.6770-1.6720)10,000=$50 short In another scenario, it appears that the upcoming trade accounts will be higher, while Eurozone exports have been hit by bad weather factors You expect the dollar to strengthen against the euro at this point, so decide to sell at 1.4989 with 1:50 leverage, or short 10,000 euros therefore ( 10,0001.4989/50)=€299.78 Assuming you made a good decision at this point, the EUR/USD then weakened and decided to close the position after the EUR/USD fell to 1.4902, i.e. down 87 percentage points, your profit at this point is calculated as follows: (1.4989-1.4902)10,000=$87 On the other hand, if At this point the EUR/USD strengthens, it means you have a loss, you decide to buy and close your position after the EUR/USD goes higher to 1.5114/1.5120, your loss is calculated as follows: (1.5120–1.4989)10,000=$131