Forex Trading Basics - Welcome.
Here are some of the most basic facts that should be learned by an enterprising individual who wants to enter the world of forex trading, or somebody who wants to review some topics about forex trading.
Defining The terms in forex trading
In its simplest terms, Forex exchange is just the simultaneous transacting of a currency to another currency. Foreign exchange market refers to a massive and liquid money market that runs all hours of the day, but there is no central trading venue. Much of the trading transactions are done by phone calls or through the e-trading network. The primary market is the interbank where insurance firms, large banks, and big companies manage the risks carried by the fluctuations.
A rollover is a spot transaction which is due for settlements within 2 working days. Cost of the rolling is anchored on the interest rate differences between the 2 currencies involved. To say that you are long (bought), the currency holding the bigger rate of interest means you would get an interest. However, if you are short or you sold currency, the currency with the bigger rate means you would be paying the interest sum. A lot of brokers would at once roll over the open positions, permitting the client to hold a position for an indefinite time.
Meaning of currency terms
Base currency - The base currency is the 1st currency in the pair involved, and the currency one's account is based on.
Counter currency - The counter currency is the 2nd of the pair, and it is also labeled as "currency" in the industry.
The most traded currencies in the world of forex trading are: USD, EUR, JPY, GBP, CHF, CAD, AUS, and the New Zealand dollars.