ByLCMS Traders FX Analysis Team
APR 21, 2021
Forex trading can be hard to wrap your head around, especially with all the graphs and charts on-screen that can appear more complicated than they really are at first glance. The fundamentals of forex trading are actually fairly simple, and with enough repetition, it’ll be second nature to you.
Whether you’re a newbie or a rookie looking to brush up on their knowledge, this guide will help you out:
Spread
Between two currencies, there will be a set price for asking and bidding. The difference between the two of them is called the spread. If the US dollar to AUS dollar is trading for an asking and bidding price of 1.005 and 1.003 respectively, the spread will be 0.002. All you have to do is subtract the asking price from the bidding price to get the spread.
Position
A trade is referred to as a position when it’s still being carried out. If the value of a purchased currency is expected to rise in value due to any condition, it’s called a long position. You can finish the trade and close down the long position by selling off the currency at a higher price.
Conversely, short positions are sold at a lower price after loaning from others and then you get the original amount from the lender, making a subtle profit.
How Currencies Are Traded
Currencies are generally traded in the form of brackets called currency pairs. Two currencies are pitted against each other, for example, USD and AUD. People in the forex market then apply different strategies on different pairs available, hoping for the biggest spread difference they can achieve for maximum profit.
Apart from the more popular brackets, there are crosses and exotic currency pairs of less popular markets. Crosses and exotic currency pairs are more susceptible to volatility on the basis of political changes, meaning less liquidity overall, which makes them less desirable by many.
With more competition in the market, it’s important that forex businesses change their strategies to stay relevant in the market. Stay in the loop regarding all the scoops of the forex world with a renowned forex news site, curating an inventory of best resources, predictions and analysis about the economic calendar and exchange market with Forex Trading Asia.
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