Why Trade Forex with TradeDirect365?
Major Forex Market Information
Min. (Fixed) Spread
Fixed Spread Hours
|EUR/USD||0.8 points||0.8pts at all times||0.50%|
|AUD/USD||0.8 points||0.8pts at all times||0.50%|
|USD/JPY||0.8 points||0.8pts at all times||0.50%|
|AUD/JPY||2 points||2pts at all times||0.75%|
What is Forex?
Forex, also known as FX or foreign exchange, is the most widely-traded financial market in the world, with an estimated $9 trillion traded in the FX markets every day.
Put simply, forex is how a business or individual converts one currency into another. Unlike stocks or commodities, there is no central exchange when it comes to forex, which means you can trade it day and night, Monday through Friday – and this is one of the main reasons for its popularity.
Price movements can occur very quickly in forex because it is influenced by many factors, notably interest rates, employment figures, inflation and government policy. With so many people trading fx every day, there can be massive price movements in a heartbeat – making it not only the largest financial market in the world, but also one of the most volatile.
How Do You Trade Forex?
Trading FX via a broker’s trading platform gives traders the ability to speculate on the price movement of a currency pair without having to purchase any foreign exchange. Currencies are always traded as a pair – you are essentially buying one currency and selling another at the same time. If you believe that a currency pair will rise in value, you would open a BUY trade (go long) or, if you think a currency pair will decline in value, you would open a SELL trade (go short).
- You think that the Australian dollar (AUD) will increase against the US dollar (USD), so you enter a BUY trade on AUD/USD at 0.75000
- 2 days later AUD/USD has risen to 0.75800.
- If you decide to close the trade at this point, you would have made a profit as AUD/USD has increased from 0.75000 to 0.75800, an increase of 80 pips
- However, if AUD/USD had of declined in value, to say 0.74300 (from 0.75000), then you would have made a loss on that trade.
It is worth pointing out that you can also make a profit (or loss) from a falling market. That is, you can speculate that a particular currency will decline in value. If it indeed does decline in value, you will make a profit on that trade.
What are FX Pairs?
As mentioned above, all currencies are traded as a pair – you cannot have one without the other. FX pairs are typically divided into three main groupings, major, minor and exotic;
Major FX pairs
Are the most-traded currency pairs in the world (based on daily trade volume) and all contain the US Dollar (USD) on one side of the pair, i.e. EUR/USD, USD/JPY, GBP/USD, USD/CAD, USD/CHF, AUD/USD and NZD/USD. Major FX pairs are the most liquid and will generally have the lowest spreads attached to them. The seven major FX pairs account for c., 80% of all daily FX trading globally, with EUR/USD volume around 30% of all FX trades.
Minor FX pairs
Currency pairs that do not contain the US Dollar are known as cross-currency or minor currency pairs. The most traded minor pairs are derived from the 3 major non-USD currencies – the Euro, the GBP and the Japanese Yen. Examples of minor pairs include: EUR/GBP, EUR/AUD, AUD/JPY, GBP/AUD and GBP/CAD.
Exotic FX pairs
These fx pairs are made up of a major currency mixed with the currency of an emerging economy, or a strong-but-smaller economy like Norway or Singapore. Some exotic FX pairs include: USD/NOK, USD/HKD and EUR/TRY.