ETF trading is a concept that is free from traditional equity and bond. Understanding the basics of ETF trading is not difficult, and one can easily start trading understanding the basic terms. Here we will discuss this online business platform and provide beginners a foundation of knowledge so that they can determine trading is for them or not.
Forex Trading
When we visit a foreign country, we generally exchange our dollars with the destination place currency, which can be yen, euros, or pounds, to buy the services or goods of that certain place. This exchange can be taken as a metaphor for the Forex. This is the buying of one currency against another. This platform is considered as one of the giant marketplaces in the world that has approximately $5 trillion of transactions per day.
Currencies
Almost all types of currencies are used in this platform, but the most popular currencies are USD, EUR, JPY, GBP, CAD, CHF, AUD, etc. There are other currencies, too, but these are the most widely used currencies over the world. To know more about professional environment, visit company website of Saxo. By reading their free education articles, you can easily boost your trading skills and become a good trader.
How to Trade
Currencies are traded based on their value and due to the liquidity in the market, buying and selling financial instruments are a little bit easier here. FX trading is done in pairs where one currency is brought against another, and it is important how we label our currency trade. For instance, if we are eager to trade with the euro against the U.S dollar, our trade will start using EUR and end in USD. When we find the euro may rise, then we should buy EUR/USD. On the other hand, if we find the euro may take the downtrend, then we can sell EUR/USD.
We may take it as borrowing the first currency in the pair for the second. When we look at the FX, we will find the value at the end of each pair. If we find EUR/USD with the price of 1.0997, then it will mean that its cost can be 1.0997 in U.S dollars to buy a single euro.
The Pip
Profit or losses are counted as pips in the Forex platform, and a pip is regarded as the fourth decimal place in a currency pair. For instance, if one can buy EUR/USD at 1.1000 and sell it at 1.1050, then he can say that we have gained 50 pips. The profit depends on the number of currencies we have bought. For instance, if we purchase 1000 units of EUR/USD at 1.1000 each pip, then it can be worth $0.10. If we sell that in EUR/USD later with 1.1050, then we are getting a 50 pip move, and if we multiply that 50 pip with $0.10, then we can get a $5 gain.
This indicates that the more units we can buy, the more valuation will be added with our pips. A mini lot is considered with ten thousand units; on the other hand, a standard lot is considered with one lakh units. For a standard lot, each pip has a value of $1; on the other hand, a standard pip has a value of $10 each.
Each pip may change its value based on the currency pairs, and if USD is in the second pair, then the pip is $0.10 worth—the value changes depending on the second currency in the pair every time. To find the value, we can divide the pip value with the current exchange rate between the second pair and USD.
These are all basic about the working procedures of Forex trading and make some profit from here; investors must work diligently calculating the risk management. Understanding the fundamental and technical analysis can work greatly to ensure the best online trading opportunities.