In the FX market we buy or sell currencies. Where trade mechanism is very similar to that in most other markets (such as stock). So it is quite simple, and if you already have experience in stocks should you will have no difficulty in making forex trading. The purpose of trading forex is expecting that the price will change where you bought that currency increases in value, so that you take advantage of the difference in value.
Exchange rate / Rate is the ratio of one currency against another currency assessed.
For example, the exchange rate USD / CHF indicates how many US dollars can purchase one Swiss franc, or how many Swiss francs you need to buy one US dollar.
Writing pair / forex pair is always written in pairs, such as GBP / USD or USD / JPY. The reason why they are written in the pattern of the pair, is because in every foreign exchange transaction we are simultaneously buying one currency and selling another.
Here is an example of the exchange rate for the pound versus the US dollar: GBP / USD = 1.7500 The first currency listed to the left of the slash ("/") is known as the base currency (in this example, the British pound sterling), while the second on the right is called the counter currency (in this example, the US dollar).
When buying, the exchange rate tells you how much you have to pay to buy one unit of the base currency. In the above example, you have to pay 1.7500 US dollar to buy 1 British pound.
In forex trading, you are going to buy a pair / pair if you believe the base currency will rise or rise. And conversely, you would sell the pair if you think the base currency will depreciate (go down) relative to the counter currency.
Buy / Sell (Buy / Sell)
In forex trading terms which are commonly used are:
Buy or Long or Buy: If you think the base currency will go up.
Sell or Short or Sell: If you think the base currency will go down.
Difference Supply and Demand (Bid / Ask Spread)Offers (Bid) is the price at which you are as a trader will sell the base currency.
Request (Ask) is the price at which you are as a trader will buy the base currency.
The bid price is always lower than the demand, and the difference is often referred to as the Spread. In forex trading broker in this difference usually take advantage as the cost of their services.
Close / Close Transactions
Once you buy a pair, you will surely be sold again to realize profits. Well in this case forex popularly called by Close.
If you Originally Buy, to close means CLOSE (Sell)
If you Originally Sell, to close means CLOSE (Buy)
Well until here you have studied three main forex trading are:
Buy / Sell, Close, Bid / Ask, and Spread
Furthermore, let's see how we can earn money from forex trading (Maybe this is that you've been waiting for from earlier)