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Things You Need to Know Before Trading Forex

2021-04-21 11:12:47


What is Forex?

Foreign exchange trading (or Forex for short) refers to the exchange (also called buying and selling) of currencies in different countries. The foreign exchange market is one of the fastest growing markets in the world in recent years. Forex trading is open 24 hours a day, 5 days a week, trading uninterruptedly.

In fact, Forex trading is very similar to stock trading-buy low and sell high. But the advantage of foreign exchange trading is that you do not need to screen thousands of industries and companies. Forex trading is much simpler than choosing good stocks.

If you have just entered the Forex market, you can trading based on your views on the economy and future development of specified countries you want to invest in. Buying and selling currencies is as simple as buying and selling ordinary commodities.

At the same time, the trading hours of the foreign exchange market are not limited. The foreign exchange market is open 24 hours a day, 5 days a week. For traders all over the world, flexible transactions can be carried out at any trading time, not limited to computers, web pages, and mobile phones.


What is Currency Pairs?

When we trade Forex, we are actually buying one currency and selling another currency at the same time. This is why Forex is traded at the exchange rate of a "currency pair".

As the name implies, major currencies refer to several currencies that are frequently traded in the world, including Euro (EUR), U.S. Dollar (USD), Japanese Yen (JPY), British Pound (GBP), Australian Dollar (AUD), and Swiss Franc (CHF), etc. . The figure below lists several major currencies and their issuing countries and symbols.
















What is Spread?

Each currency pair listed has an exchange rate, which consists of a "sell" price and a "buy" price. The sell price is the price at which the broker sells a given currency pair, and the buy price is the amount the broker is willing to pay for buying this currency pair. The difference between the selling price and the buying price is called the spread. The smaller the spread, the more fees you will save per transaction.

In JRFX, we have dozens of tradable currency pairs, and the spread is as low as 0.0 pips.

04 What’s the relationship between Forex market and interest rate?

Have you noticed that experienced Forex investors often pay attention to the interest rates?

*High interest rates will help a country attract foreign investment, thereby increasing the demand for money, which in turn will cause the currency to increase.

Interest rates are like a barometer of a country's economy. As a country's economy strengthens, consumers will have more disposable income, and prices will rise accordingly, causing inflation. The central bank of each country will take measures to raise interest rates to ease inflationary pressure before it gets out of control. The result of high interest rates is that economic growth slows down until the central bank starts to lower interest rates to encourage economic growth and expansion.

The trend of interest rates is generally speculated based on the central bank’s statements and meeting minutes. This is why investors tend to analyze word by word to determine what possible interest rate moves the central bank will make at the next meeting. Therefore, the direction of interest rates is often more important than the interest rate decision itself.


What’s Other Factors affect Forex?

Apart from interest rates, there are many other factors affecting the medium and long-term trend of Forex market, including gross domestic product (GDP), US non-farm payrolls (NFP), consumer price index (CPI), producer price index (PPI), durable goods orders, claims for unemployment benefits, industrial production index, trade balance, unemployment rate, retail sales, etc. Differences between published data and expectations will have different impacts on currency pairs.


Types of Forex Trading Market

The foreign exchange market (FX Markets) is usually classified according to the time of the transaction, and there are spot market (Spot), forward market (Forward), swaps (Swaps) and futures markets(Futures).

Spot foreign exchange transaction (Spot), also as known as spot transactions, refers to the fact that after the transaction of foreign exchange transactions, both parties to the transaction conduct delivery on the same day or within two business days. Currency prices are determined by supply and demand, macroeconomics, and national policies.

On the other hand, contracts traded in forward and futures market represent a demand for a certain currency type, with a specific price and future settlement date for each unit.

Risk Warning: The above content is for reference only, and does not represent JRFX’s position. JRFX does not assume any form of loss caused by any trading carried out in accordance with this article. Please consult your financial planner for your investment portfolios and manage your own risk.

JRFX is an online CFD broker providing more than 50 products for Forex, metals and commodities. Open a trading account within a minute. Deposit 100USD and download our MT4 trading platform now!

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