What is Forex trading?
Forex (or FX) is an abbreviation for “foreign exchange”.
The forex market is where one currency is exchanges for another at a certain exchange rate ot price as part of the over-the-counter (OTC) market. The skill is in estimating whether the currency will rise or fall compared to the other currency: allowing a trader to profit or lose from the changes in value between the two currencies.
There are a number of factors that influence whether a particular currency will rise (appreciate) or fall (depreciate): including geopolitics, economics and even natural disasters. The goal is to earn a profit from these exchanges in value while also predicting how forex prices will change in the future.
What is the forex market?
The forex market does not have a physical or central location: instead it operates 24hrs a day thanks to a network of global businesses, banks and individuals. Trading works around the clock: beginning on a Monday morning in Wellington, New Zealand; before progressing to Asian trade centred in Tokyo, Japan, and Singapore; then to European trade focusing on London, England; and then moving to New York City. Currency prices constantly fluctuate: which presents a host of trading opportunities. In fact, the forex market is the biggest market in the world: with daily turnover surpassing US$5trillion a day.
How does forex trading work?
FP Markets offers its clients a forex product known as a Margin FX contract.
Some of the key points of forex trading with FP Markets are:
- Small lots can be traded:Lots can potentially be as small as 0.01 equivalent of $1,000 per trade.
- Leverage: forex trading typically involves leveraging, potentially as high as 1:500. This means that if you had a leverage of 1:100 you could use a deposit of just $1,000 to control currency of $100,000. This can potentially lead to magnified increases: but conversely, it can also magnify any losses too.
- Pricing: All trades are based on the quoted price of one currency against another. In each case there is a “base” currency compared to a “counter” currency: with the base currency always shown on the left in any quote, such as EUR/USD. If you believe the base currency will gain strength compared to the counter currency, you should buy that currency pair: and if you believe the base currency will weaken, then you should sell that currency pair.
- PIPs: Stands for Percentage in Points, in most cases, currency pairs will be quoted to five decimal places – meaning any change to the fourth decimal point is referred to as a PIP.
- Spread:The difference between the bidding price and the asking price is referred to as the spread.
Why choose FP Markets?
We offer competitive spreads, We are 100% Australian owned and operated and have been in business for over 10 years. During that time we have become one of the most highly awarded CFD and FX providers in the market.
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If you require information about any of the products or services we offer, please don’t hesitate to contact a First Prudential Markets representative on 1300 376 233 (Aus) / +61 2 8252 6800 (Int) or Email Us.