Saturday, January 7, 2017

[FOREX 101] I'm a n00b in Forex

What is Forex?

The Forex (Foreign Exchange) Market is the largest market in the world. It is the market where currencies are traded. Each day, more than 4 trillion dollars are exchanged.

The Forex market is open 24 hours a day, so that you can be right there trading whenever you hear a financial scoop. Take note of when markets open/close and when their peak times are.

Unlike the stock market, a smaller market with tens of thousands of stocks to choose from, the Forex market revolves around more or less eight major currencies. A narrow choice means no room for confusion, so even though the market is huge, it’s quite easy to get a clear picture of what’s happening.

The enormous volume of daily trades makes it the most liquid market in the world, which means that under normal market conditions you can buy and sell currency as you please.

The colossal size of the Forex market also makes sure that no one can corner the market. Even banks do not have enough pull to really control the market for a long period of time, which makes it a great place for the little guy to make a move.

Use technical analysis (indicators on charts) methods from other markets like equities. I'll need to learn about that and share it here.

Some useful terms to not get lost in translation:

A Pip is the "Percentage In Point" (PIP), sometimes also referred to as "Point". It is equal to the minimum price increase of a Forex trading rate. The most common Pip is 0.0001.

The ask price is the price you can buy a currency at. It is also the price at which the market is willing to sell the currency to you.

The bid price is the price you can sell a currency at. The market is willing to pay you this price for this particular currency.

Spread are the difference between bid price and ask price. You'll want to get a broker that has small spreads because say you put in a buy order at bid price, you won't break even until the price reaches the ask price. The wider the spread, the longer it takes.

A currency rate against another currency rate.

bitcoin faucet

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