The world of trading on the financial markets is dynamic and always changing. There is always something new to learn and education is really important in order to start making profits. Forex might seem a bit difficult to get used to and possibly overwhelming for new traders but in fact, it is simple and it takes no more than a few hours to grasp the concepts. In addition to our financial experts who are always available to help you get started, we would also like to present you with some Forex basics in the form of a few articles which we believe will answer most of your questions.
Whether you are a beginner or an experienced trader, improving your skills and expanding your knowledge is essential in order to keep up to date with global Forex trends. We know how important it is to have help to enhance your Forex knowledge, so that’s why we have created the Knowledge Centre and the Resources Section on our website. You can always rely on the educational tools that we provide to improve your skill.
Our educational articles were created with the help of our experts who drew on their years of experience in financial markets in order to help you learn as fast as possible. We at Novatrades place a high value on the opinion of our traders so this is why we have taken into account all of your remarks and recommendations, providing you with content that can be understood easily and will help you get started almost immediately.
Our goal is the happiness of our current customers but also we would like to do everything in our power to help new or potential clients to start investing on the Forex market with confidence.
The basics of Forex trading
What every beginner trader should know is that one of the simplest ways to participate and invest in the Forex markets is Buying and Selling. Basically, this means that a trader buys a currency pair while another trader is selling it. Each currency pair has two prices. The first one is the Bid Price which is the price at which the market buys, and the second one is the Ask Price – which is the price at which the market sells. The difference between these prices is known as the Spread.
Placing an order or Opening a position means when you decide to buy or sell a currency pair. For example, let’s pick EUR/USD which is one of the most common pairs and click on BUY/SELL on the trading platform. Now you have opened your position and are waiting for the market to respond.
Please note that the markets are influenced by a lot of factors. They might be political, economic, related to climate or even extreme such as wars, terrorism attacks, and others. Every single worldwide event impacts the market and experienced traders know that this is the time when the profit potential is really high.
Forex currency pairs
The most popular assets to trade on the Forex market are the currency pairs, such as EUR/USD, GBP/JPY, and others. Every pair consists of two different currencies. The first one is the Base Currency and the other is the Counter Currency. When buying and selling, a trader deals with the Base Currency.
For example, if you want to buy GBP/USD, then you will buy Pounds and sell Dollars, meaning you are expecting the Pound to rise and the Dollar to fall. Every transaction on the Forex market is double-sided and performed with a buy/sell order.
Margin is the difference between your capital and the amount you can invest. This is the amount of collateral required by Forex traders to maintain their open positions on the Forex market. If an account falls below the margin requirements, then all open positions are automatically closed and a client gets a margin call via e-mail, when the margin indicator drops. For example, if a trader buys 20 000 EUR/USD at 1% margin, they will need 200 EUR in their account balance in margin to open the position.
Leverage is a term in Forex which allows you to trade with a larger amount of currency than you have deposited in your account. Trading with leverage is one of the most powerful Forex tools and is a great way to exponentially maximize your initial investments. For example, if your margin is 1%, this means that the leverage is 1:100, so you will need only $20 in real funds in order to buy $2000 worth of currency on the market.
Forex rollover / swap rate
A Rollover means moving a Forex position to the following delivery date, in which case you are likely to either pay or receive a rollover fee. If a trader holds a trade in the spot Forex market overnight, this position is rolled over. The classical rollover fee is determined by the difference in interest rates between the two currencies underlying a transaction.
Forex trading hours
The Forex market is based on “spot transactions” and trading takes place 24 hours a day, 5 days a week. The only time trading ever ceases is on weekends and holidays. This includes Christmas and New Year’s Eve, when the Forex market closes early.