Learn Forex

What is actually forex trading? what is involving to this trade? Is it possible to make money via exchanging money currencies? Is forex safe?

We will enlight all this darkness about Forex. Below article written by an Forex expert, lets read it.

FOREX Contract Size
FOREX currencies are traded in a standard contract lot size of 100,000 units (ex: 100,000 US dollars) of the base currency. A unit equals one (1) or single unit of currency (ex: 1 unit = 1 US Dollar).

FOREX Trade Pairs
All FOREX trades are made up of a foreign currency pair, for example the EUR/USD pair.

Let’s assume we’re trading the Eurodollar and the US Dollar FOREX pair (EUR/USD).
The first currency in the pair (EUR/USD) is called the base currency, which is the Euro in this case. The second currency is called the quoted currency (EUR/USD). In this example it’s the US Dollar.

FOREX Pair Price/Quotes
All FOREX currency pairs have a corresponding price/quote. So, when trading or viewing a price quote of a FOREX pair, using our example, you would see this:

- EUR/USD 1.2526/2528 – - often shown as EUR/USD 1.2526/28 – - with the latter price showing only the last 2 digits.

(These price/quote numbers are for example use only, and do not reflect actual or current pricing)

The Bid/Ask
The price/quote of our FOREX pair example – EUR/USD 1.2526/28 – is referred to as the bid/ask. So, if selling the EUR and buying the USD, you would sell (1) EUR, and this would equal to simultaneously buying 1.2526 US Dollars. Or, if you were buying the EUR and selling the USD, you reverse the equation a bit….and the USD ask price of 1.2528 would equal (1) Euro.

PIPs

PIP’s (aka: Price interest Point) are another very important and unique part of a FOREX trade. In the FOREX market, currency pair quotes/prices are quoted out to the fourth decimal point.

Different currencies don’t all go out to 4 digits. The Japanese Yen for example only goes out two decimal points like this – 123.17 – the “7″ being the PIP.

In this example (EUR/USD = 1.2526/1.2528 – the PIP in each price/quote is the last digit (6 & in the price/quote number. The difference between the two prices/quotes is called the PIP spread, and in our example it is a 2 PIP (= 0.0002) spread. This spread is how the FOREX brokerage firm handling your trade makes money. They buy slightly lower than the ask or selling price, and profit off the difference.

This can be confusing at first. But the more you learn about FOREX trading, the clearer this will become. Just stick with it, and eventually the fog will lift on better understanding the simultaneous buying/selling of a currency pair, calculating PIP’s and trade profits, the bid/ask, etc.