Forex Trading – The basics
Forex trading is an online currency exchange marketplace where traders buy one currency against another and sell them after holding for a particular period. The value of these currencies increase or decrease based on the currency’s condition, the country’s economic performance, GDPs, interest rate, inflation, unemployment rate, major political or geopolitical events, and so on. Professional businessmen report that Forex is one of the biggest and highly volatile markets globally, and every day millions of transactions are taking place in this marketplace.
Because of its easier accessibility and potentiality to earn money, ETF trading is gaining popularity. Many people are joining this platform to become independent and to earn their living from here. Still, many of them don’t have sufficient knowledge about this platform. Now, we are about to focus on that point.
What are the currency pairs?
Before entering the platform, a trader must know about the currencies that can be bought or sold in the market against another. One of the most popular currency pairs here is EUR/USD. The pair means – how many USD will require to buy 1 EUR. You have to be familiar with the currency symbols and their full name. Such as, GDP stands for British point, CAD stands for Canadian $, AUD stands for Australian $, NZD stands for New Zealand $, CHF stands for the Swiss franc, JPY stands for Japanese yen, and so on.
When you see a pair such as EUR/USD, you have to understand that it indicates the amount of the second currency (USD in this case) needed to buy a unit of the first currency (1 euro). If the price of EUR/USD pair is 1.3333, it will indicate that the trader will need 1.3333 USD to buy 1 euro.
As a new trader in Singapore, you need to understand ETF trading well. Take your time and study the important market details to improve your skills at trading.
To learn Forex trading, a trader must be familiar with the basic terminologies of this platform. Let’s take a look –
In the CFD market, an investor may notice three major types of trends –
- Bullish or upward movement or uptrend: In this market type, the price will move upward. The uptrend is considered favorable for the people as they can sell the currency at a higher price.
- Bearish or downward movement or downtrend: In this type, the price of the currency moves downward. This kind of trend indicates that the price of a currency is falling, which is a threat for the traders.
- Ranging or consolidated market: Often, neither bearish nor bullish movement is noticed in the chart. The price remains in a static condition and rarely changes its value. This type of trend is considered a ranging market.
Resistance and support level
Resistance and support are important terms because many technical indicators have been developed based on its concept.
Resistance is the point where the uptrend attains a peak value and then starts moving downward. Investors sell their bought financial instrument at this point since it is the maximum value attained by that instrument.
The support level is the point where the downtrend reaches the minimum or bottom value and starts moving upward. It should be the point where the beginners should buy their financial instrument since it has the lowest value at this spot.
Risk management is an important terminology in the Forex world. It includes many issues like stop-loss and take-profit limit, the risk to reward ratio, trade or volume size, and so on. All these things are included in the trading strategy so that during a massive crash, an investor can take care of his capital by closing the trades minimizing the losses.
Gathering adequate knowledge about the above terms will help a beginner to learn something more advanced and understand the features of various trading platforms.