Basic Knowledge of Forex

Basic knowledge

Trade in a new market as if learning a new kind of language. You will find much easier when you understand basic knowledge. Before you learn how to trade on our platform, start with the Forex basic knowledge.

What is Forex?

Forex is also known as ‘foreign exchange’, ‘Forex’ or ‘FX’.Forex trading is the simultaneous exchange, buying and selling, of one currency for another primarily for speculation purposes. Forex trade is  is similar to stock exchange. If a stock investor thinks that the price of certain stock is expected to drop in the future, then he or she will sell out the stock. Similarly, if a forex investor expects the rate of certain currency pair will rise in the future, he will buy in more of this currency pair, but if he or she expects the rate of such currency pair will drop in the future, then he will sell out the currency pair.

Forex quotes

Forex quotes consist of the base currency (left-hand side of the backslash) and the quote currency (right-hand side). The base currency is the currency what you are willing to buy using the quote currency, and the rate you see is how much quote currency is needed to buy one unit of the base currency. For example, EUR/USD 1.19418 presents 1 euro is equivalent to 1.19418 US dollars.

A lot

A lot is a standardized quantity of the instrument you are trading. In forex, one lot is 100,000 units of a particular currency.ATFX offers the minimum volume is 0.01 lot, which is 1,000 units of a particular currency.

Pip

Pip stands for Percentage in Point and it is the smallest price change that can be seen in an exchange rate. In most cases currency pairs are priced to four decimal points and the smallest change can be seen in the last decimal.  For example, EUR/USD rising from 1.4022 to 1.4027 means euro increases 5 pips.

Leverage and Margin

As mentioned above, all the trades are executed with “borrowed money” and here “leverage” is applied. Leverage is expressed in ratio form, so if it is 1:100 for example, a trader’s buying power is magnified 100 times and is offered by brokers to maximize traders’ buying power by giving them the ability to deposit a small amount of funds and trade larger volumes, meanwhile it increases the loss risk. Leverage trading is not suitable for all the investors. Margin refers to the amount of money needed in your account to maintain an open position. Margin is not a charge or cost fee but a deposit  out of equity.

Why Forex

Low cost of investment

ATFX will not collect any fees from the investors but only the spreads from the clients’ trade. For example, the spread of EUR/USD 1.19225/1.19243 is 1.8 pips.

Two-way transactions

The investors has options to trade in forex market any time available for them for Forex market is 24 hours global market.

Use of leverage

The forex investors has opportunities to use higher leverage compared to stock market or other market. Bear in mind the leverage increases the profit and loss risk at the same time.

Practice on demo account

ATFX provides free demo  account for the clients who access the markets and practice trading under real conditions, but the money clients trade with is virtual and trade risk is free. with demo accounts , the clients become familiar with the trading platform and experience different strategies.