Guide to Forex Trading
Foreign exchange (Forex) trading is the trading of one currency for another on financial markets. These markets determine the exchange rates between currencies and often involve complex derivatives such as swaps. Going from the world of stock trading to that of Forex trading requires learning a whole new set of skills.
Forex Trading Guide
Why do people trade currencies?
People trade currencies for two main reasons. The first is to hedge against currency fluctuations. If a multinational company wants to ensure that its profits are not disrupted by the swings of a particular currency, it can use forex markets to lock in a particular exchange rate so it can remove that source of volatility from its business. Secondly, people trade currencies because they think they can make money as traders, buying and selling currencies in an attempt to make a profit.
What is Forex trading?
Forex trading, short for foreign exchange trading, is the practice of trading different world currencies on financial markets. Currencies can be traded directly in the spot market or using a variety of derivatives contracts such as forwards, futures, and swaps. Forex spot trading does not occur on an exchange, only over-the-counter (OTC), and goes on 24/7.Learn More: How Do You Fund a Forex Account?
How much do Forex traders make?
There’s no set amount, or even a range for what forex traders make. How much you make depends on market conditions, if you’re an independent trader or working for a trading firm, and your skill at trading.Learn More: Forex Trading Career: Pros and Cons
GDP is the currency abbreviation for the British Pound Sterling. The GBP is the currency of the United Kingdom (U.K.) and is one of the most highly traded currencies.
A currency peg is a policy by a nation to set a fixed exchange rate between its currency and one or a series of other currencies. This can stabilize the value of a country’s currency but limits monetary policy. Pegs can also be undermined by market conditions.
Legal tender is something that a country’s law recognizes as money. A country’s currency is legal tender and laws establishing what is legal tender make commerce easier by making it clear what people have to accept as money.
Quid is a nickname for the British Pound Sterling. It is the currency of the United Kingdom (U.K.).
Nominal Effective Exchange Rate (NEER)
NEER is the weighted average of a currency’s exchange rate with a group of other currencies, usually referred to as a basket of currencies. This is a measure of how strong a currency is on forex markets.
Forex Trading Robot
Forex trading robot is the nickname given to automated currency trading. The software used to make these trades buys and sells currencies according to specific algorithms.
A forex hedge is a strategy to help offset the risk of currency fluctuations when investing or doing business. This can be done by using currency futures and swaps, among other methods.
Interest Rate Differential (IRD)
An IRD is the difference between two interest rates between two assets. The IRD is used to compare investments in forex, fixed income, and other markets.