Fundamental principles of the Forex market

The concept of trading in the Forex market depends on the process of buying one currency and the other through the sale, to make a profit. You can do such transactions with almost every currency in the world. Let us analyze some examples:

Example 1: You have $ 1600 and the GBPUSD exchange rate is 1.6000, meaning you can buy £ 1000 for $ 1600. You buy £ 1,000, hoping that the pound will rise against the US dollar. After a while, the GBPUSD rises to 1.6100 GBP. At this rate, you can exchange £ 1000 for $ 1,610. That way, you have a profit of $ 10.

Example 2: Let's assume you have £ 1000, and the exchange rate of the pound sterling is $ 1.6000. You sell GBP for $ 1600 and hope that the pound will fall against the US dollar. After a while, the price drops to 1.5900, and decided to reverse and buy the pound for 1600 US dollars at this rate. As a result, you have £ 1006.28. That way, I made a profit of £ 6.28.

We can provide several conclusions based on these examples:

You can earn through both methods: when a currency rises or falls against another currency.

The main tool in Forex is a currency pair - the ratio of one currency to another. There are more than 100 currency pairs on the market. Some currency pairs are traded in larger volumes, while some are traded in smaller sizes. For example, 66% of total turnover comes to major currency pairs (major currencies).

These pairs are EUR / USD, GBP / USD, USD / JPY, USD / CHF, AUD / USD and USD / CAD. I noticed that each pair contains the US dollar. That's because the dollar is a global reserve currency. The US Dollar is involved in all currency transactions at all.

Currency pairs that do not contain the US dollar are called crosses. These currency pair rates are calculated with the help of the US Dollar. For example, the account will be executed on a EUR / JPY currency pair in this way: EUR / USD to USD / JPY.

The currency that first appears is called the base currency. Where all operations are performed with the base currency at all. For example, the EUR / USD currency pair. You sell or buy the euro against the dollar you own in your account. If you have another currency in your account, for example, you have a GBP account, to complete the transaction on EURUSD, an automatic conversion process occurs in USD, and the trader does not incur any costs or do any unnecessary actions. Everything is done automatically.

The second currency in the currency pair is called the reserve currency. As it is an expression of the base currency price. If € 1.4000 is US $, it means that you can buy 1 euro for $ 1.4. The currency that comes in second place appears as a result of two currencies to each other. This percentage is called the quote.

Supply and demand.

When you look at the forex quote table, you'll see two quotes for each currency pair: the purchase price and the selling price. The purchase order is always higher than the price to be sold, the purchase orders are opened at the asking price and closed at the bid price. Sales orders are opened at the bid price and closed at the asking price. The difference between supply and demand is called difference. The difference is determined in points.

Leverage and margin in Forex.

There are two important conditions in the Forex market: the margin and the leverage. Usually trading for Forex is in large volumes with enough money (one standard unit is 100,000 shares of the base currency). There is always the opportunity to trade smaller sizes (for example, 0.01 shares or 1000 units of currency), but not every person, who wants to experiment with digital currency trading has this amount of money. This is why traders have a chance to use the leverage.
According to "trading-secrets"