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Understanding forex trading

Forex Trading in South Africa (For Beginners),Why Do People Trade Currencies?

AdStart Trading with one of the leading brokers you choose, easy comparison! We Checked All the Forex Brokers. See The Results & Start Trading Now!blogger.com has been visited by 10K+ users in the past month AdTrade Forex CFDs With Real Time Quotes! Capital at Risk. Seize New CFDs Opportunites! Trade from your Mobile and Tablet AdUse the signup bonus to start investing in forex today! Take advantage of advanced trading tools to discover your trading leverage AdMake The Most Of Today's Market Action. Trading is Risky. Trade Stocks, Indices, Forex, Commodities & More With An Experienced, Trustworthy Broker Understanding Trading. This series of articles starts with an essential guide on the basics ... read more

Both the above cases highlight how you can lose or gain from a forex trade, depending on your position, position size lots , leverage etc. It is best to fully understand all these dynamics on demo, and then only trade live when you have a proper strategy in place. And always remember to use a Stop-loss for every trade. Successfull forex traders follow a sound trading strategy. With technical analysis trading, you are basically relying on the price chart, and trading based on the chart patterns, technical tools like candlestics, moving averages etc.

On the other hand, fundamental trading involves trading long term based on macro economic factors of a country like their employment data, Retail Sales, Central bank's interest rates etc. Fundamental analysis mainly involved trading based on the news releases. would determine the price of currency and base the decisions of currency movement by analysing these factors.

There are plenty of online Forex news calendars available for free if you want to make it your sole trading strategy. Also, you can get an idea on how a particular information may effect the market movement upward or downward.

For example , the release of employment news data of a country is a major news because if the higher population is employed, it is a sign that the economy is improved and hence this would reflect in the overall currency value. Similarly, a bad news or policy change by the central bank of the country would likely affect the currency' price's exchange rate in the short term as well as long term.

Even if you consider yourself a Technical trader, it is really important to keep track of the Economy News as this would affect the direction of a currency. For ex. A weaker than expected Economic growth in the UK would affect the rates of GBP against other major currencies like US Dollar, Euro etc.

Similarly, an increased in interest rates by the Fed, and divergence in the Central Banks monetary policies can affect the currencies. So, it is really important to understand how ihis works, and use it to form a general bias on the currency's future price. It is wise to learn about both the strategies on demo, spend hours to analyse the charts, and also analyse how the currencies are affected during news hours, and only then trade based on the strategy that works for you.

Most Forex brokers offer multiple trading platforms for online forex trading. In this chapter, first we will list for you all the popular trading platforms offered by different brokers. And then give you the comparison of all the best forex brokers based on their platforms. Metatrader gives traders the ability to perform advanced trading operations, run Expert Advisors and copy trades of other traders. This platform is owned by MetaQuotes Software Company.

The best feature with MT4 also offers the flexibility to write your own code and create your own custom indicators and 'Expert Advisors' or EAs. Most of the brokers offer MT4 or the latest MT5 for free. We advise you to go for a broker that offers Metatrader.

cTrader: CTrader Platform is offered by some of the regulated forex brokers like FXPro. Their fees with cTrader platform is lower than their fees with MT4 platform. Web Trader: Numerous brokers including Exness, HotForex, Tickmill etc. offer their Web Based Trading platform where you can just open the chart in a browser instead of downloading the software. For a start, you may want to consider trading off a WebTrader.

You can see the performace of the available copy traders over a period, risk ratio etc. You also must note that copy trading carries singinificant risks, so you must carefully check if you want to follow the strategy of a trader or not. Proprietary Platforms Some forex brokers offer their own platform.

But there are disadvantages of choosing such brokers, as you will not get the flexibility of third-party platforms. Even the best of traders have bad days, but with good money management you can minimize your risk. As for the pros , trading in the forex market offers opportunity to gain income.

But there are many risks also. Can the risks associated with forex trading be managed? Yes, it is possible. All these are sound money management practices that will ensure that you have a better chance of being a successful forex trader. All brokers have different minimum deposit requirements. We advise beginner traders to use minimum leverage of not more than for keeping your risk low.

South African traders should start with the right balance, so that you won't be overtrading or risking a lot of your capital for each trade with very high leverage. Yes, forex trading is legal for traders in South Africa. Although, it is not mandatory for traders to trade with a locally regulated forex broker but it is advised for South African traders to choose a FSCA regulated broker or a any top tier 1 regulated broker like FCA, ASIC broker for safety of your capital and fair trading conditions.

It is advised to trade with FSCA regulated brokers for traders in South Africa, as this would offer you grievance addressal in case of any dispute with the broker rather than in case of a foreign broker. There is no guarantee of profits in forex trading. Trading forex can be profitable for professional currency traders, but for most retail day traders it can bring big losses. Hence, forex trading is not for inexperienced traders.

As per some reports there are , forex traders in South Africa. The numbers may be even higher as this is growing. This is the highest number of traders anywhere in Africa. za aims to help South African traders get started with regulated Forex Trading. Read our forex guides, see unbaised broker reviews, and our best South African forex brokers listing before getting started.

Get A Free PDF Version Of This Guide: Contains all the tips, resources and case studies found here. We aim to help traders in South Africa find the best forex brokers. Read more.. Read full risk disclaimer.. za: 1 Forex Broker Comparison website in South Africa. All Rights Reserved, Rahul Sharma Last updated: July 20, See Best Forex Trading Platforms Download PDF Guide.

See SA's Best Forex Brokers! Sort By Please Select Max. Leverage Minimum Deposit. Name Regulator s Max. Tickmill is a FSCA authorized forex broker.

HotForex is regulated with FSCA South Africa. FxPro - NDD Forex Broker. FxPro is a well regulated forex broker. Their overall fees is low with cTrader account. Exness - Low Fees Broker. Chapter 1 What is Forex Trading?

Chapter 2 Understanding Currency Pairs. Chapter 3 How to trade Forex in South Africa? Chapter 4 Forex Trading Strategies. Chapter 5 Forex Trading Platforms in South Africa. What is Forex Market? Forex Trading: Real Life Example Have you travelled abroad to another country?

This chapter will explain everything you must know about currency pairs. Let's begin! What are Currency Pairs? Currency Pairs Lingo Here we will explain all the important terms that you must know before understanding more about forex trading.

Let's begin this chapter! ZAR Accounts are available. Funds safety — Hotforex is regulated with South Africa's FSCA FSP No. So, your position sizing total lots should be calculated according to your risk. Another concept related to leverage is margin, which we will explain below. Below is an example of how a Sell Order works in Forex trading.

We will give you brief idea of these 2 trading strategies in this chapter. Which Trading Strategy Should you choose? Chapter 5 Forex Trading Platforms for South Africans. Let's go…. Note: Some forex brokers charge high trading fees, so you must make sure to compare the spreads of major CFD instruments at different forex brokers before choosing. This is the reason that it is highly liquid, so you can easily open and close trade on most of the currency pairs, and you never have to worry about a particular pair not being available for trading, especially for the Major currency pairs.

Regardless of the execution model of your forex broker, you should get the fill of your order in micro-seconds, if your broker is good. Most forex brokers now have quick order execution. You can place a buy order on a currency pair if you believe that the base currency is stronger.

Alternatively, if you think that the currency is not going to do well for some reason, then you can place a sell order. For ex: If you think that the price of Euro is going to go up against the US Dollars, then you can buy Euro by selling USD. You can trade 24 hours: Forex markets are open 24 hours a day, 5 days in a week, from Monday to Friday. So you can even trade according to your time zone, but the liquidty may be higher during certain time of the day or week.

South African timezone allows traders to trade during 2 most active trading sessions i. With leverage you can trade on a margin that allows you to trade with more money than your actual capital.

While leverage is a double-edged sword, it can help you gain massive profits, if you are winning your trade. But we advise you to never use more than leverage. Little gapping on weekdays : Gapping refers to the assets abrupt changes in the price leading especially due to lack of trading activity. Gapping is common in stock markets, but the forex market is so liquid, that you see little gapping atleast in case of major currency pairs.

You may see some gapping during week opens on Monday after the weekend, but on week days it is very uncommon for major pairs to experience gapping. Risks of Trading in Forex Markets Forex trading involves certain risks, and you can lose your capital trading in the market. So you must know about all the risks to trade successfully. If you are using very high leverage then you can even lose most of your trading capital on a single losing trade.

You could make approx. The leverage should be much lower if you are trading CFDs on other volatile instruments. For example, if you are trading CFDs on cryptos, you should avoid using any leverage. If you are trading indices, then you should not use more than leverage.

Most brokers don't have any restrictions of leverage, so you must self-regulate. There are cases where the unauthorised brokers lure people into scams by way of false promises is common and any broker promising high returns or high income from forex should always be avoided.

Before choosing any broker, you should always check if your broker is regulated by ateast 1 of the top tier regulators i. FSCA South Africa , FCA UK , CySec etc. Also, if you have checked that the broker is regulated, then the next point should be to check their reviews, transparency in dealing with issues in the past etc. Also, verify that the broker you are choosing is actually regulated. So you should check that the website where you are signing up is the actual Regulated broker's website.

Forex Markets are very Volatile: Every market comes with a degree of risk associated with uncertain volatility. Unfortunately, most of these factors are not in control of a trader. Hence, it is advised that before opening or closing any trade, you should always check if there is upcoming some news that can impact the volatility. Also, make sure to always have a stop loss in place in case the market goes against you. Across almost every time zone in these locations, trading is conducted.

This means that when the trading day in the U. for example ends, the Forex market begins again in Tokyo and Hong Kong. Here is a Quick overview of terminology Forex traders will come across in their trading journey. It is extremely important to understand the language spoken in the Market as any misunderstanding can and will cost an investor in currency.

The bid is the price at which a trader can purchase the said currency, whereas the asking price is the price at which you can possibly sell it. The spread refers to the difference between the bid and the ask price of a currency pair. For example — If the bid price is A spread is measured in pips, so this would be called a 5 pip spread.

A financial instrument is a financial medium used in a financial market. One of these instruments is called a Swap. Currency swaps are the most common type of forwarding transaction agreement. A swap is a trade between two parties where they exchange the principal amount of a loan and the interest in one currency, for the same amount in another currency. Leverage , also known as margin, is the percentage or fractional increase an investor can trade from the amount of capital they have available.

Leverage will allow investors to trade speculative values far higher than the capital they have available. Simply put — Leverage is borrowed capital within a live trading account.

A Long position buy refers to the purchase of an asset, with the anticipation that its market value will rise, whilst a Short position sell refers to the sale of an asset, with the expectancy of its market value falling. Percentage in point or Pip refers to the smallest price movement any exchange rate can make. A Pip measures the amount of change in the exchange rate for a currency pair in the forex market and is the fourth and final number after the decimal point.

Market profit and loss are quantified by the use of Pips. Forex is traded in lots and a lot measures the amount of a deal. A standard lot is equal to , units of the base currency, a mini lot has 10, units and a micro lot — has 1, units. Margin refers to the initial capital which a trader needs to invest in order to open a position.

Margin will also offer traders the opportunity to open a larger position size. When an investor trades with a margin, they will only need to put forward a percentage of the full value of a position in order for a trade to be opened. The profit or loss in Forex is realized when an investor closes out a trade position. With a Profit the margin balance is increased, with a loss, it is decreased. Finding the right Forex broker can be a complicated task.

While most brokers may offer the same level of access and qualities in the foreign exchange market , the procedures and policies may differ dramatically. Each Forex broker will represent a different level in the industry. Some will represent a high level of expertise with direct access to the market while other brokers are seen as distant with very little connection on offer. The types of forex are crucial to an understanding before trading. Dealing Desk or DD brokers refer to market makers.

Dealing desk brokers or market makers will typically provide investors with fixed spreads and elect to quote above or below real-time market prices at any given time. Choosing to trade with a dealing desk is a wise choice for both beginner and expert traders who wish to avoid direct trading with liquidity providers. Dealing desk brokers customarily receive payment through spreads. No Dealing Desk forex brokers are firms that allow forex traders to have direct access to the interbank market.

A reputable NDD broker will not require the re-quoting of prices and traders will have the chance to trade following any economic announcements without facing restrictions. ECN brokers are firms that offer and display actual order book details typically feature processed orders plus the offered prices by different banks within the interbank market. Most ECN brokers will offer important information to all Forex Market participants in order to improve market transparency.

ECN brokers will allow investors to process all their transactions in the interbank market and charge a commission on each traded volume in order to earn an income. STP or Straight Through Processing brokers directly pass trading orders into their liquidity providers and do not interfere in order execution transactions. Most STP forex brokers will work with a selection of liquidity providers, providing their clients with a better chance of success in the forex market.

An MTF exchange guarantees that both buyers and sellers of financial instruments can collaborate according to non-discretionary rules. Even though an MTF is not a regulated exchange it operates under the same rules ensuring a fair trading system. An MTF exchange guarantees price efficiency and the efficient clearing of transactions.

Compared to a traditional exchange, a multilateral trading facility provides traders with greater discretion, faster order execution speed, and reduced brokerage fees. The most common live trading account types will be based on the size of the lots an investor wishes to trade.

With this taken into consideration, each different Live trading account will have a different minimum deposit level associated. Micro Accounts are accounts best suited to traders with a small amount of capital. Micro Accounts will allow investors to enter the financial market with a small minimum deposit limit. However, due to Micro Accounts having a low entry barrier, there will be restrictions on an investor's trading activity.

On the plus side, Micro Accounts will help traders to control their risk levels, making these types of accounts a perfect choice for beginner traders. When it comes to a Mini Account , investors will be allowed to enter into contract sizes of 10, base currency units. Similar to Micro accounts, Mini Accounts require a relatively small amount of capital in order to get started. Different brokers will use different names to refer to their standard accounts.

Popular terms include Classic, Silver , or Intermediate. As a standard account will require a larger minimum deposit in order to trade full lots, most brokers will provide investors with more services and better offerings than those associated with smaller account types. VIP or Pro accounts are generally reserved for investors who have a large amount of capital available. VIP or Pro accounts are generally also ECN accounts, which means they will allow investors to trade in the market directly.

Investors need to note that professional accounts for EU clients are slightly different. A swap-free or Islamic account refers to an account option available to clients who cannot earn or pay the interest due to their religious beliefs. Under Sharia laws, Muslim investors are prohibited from taking or giving interest in any kind of activity.

Islamic investors should take note that Swap-free accounts may come with higher trading costs and various restrictions. No fees in the form of interests will apply to Islamic accounts. Aside from Live Trading accounts, most reputable, regulated Forex Brokers will have a Demo account on offer. Demo accounts will allow investors to practice their trading without risking real capital. Demo Accounts are virtual accounts that are loaded with virtual currency, most of which are free to use, but may carry a limited usage period.

Opening a live trading account is generally a straightforward process and most Forex Brokers will follow a basic sign-up structure. Applicants will need to complete a registration which may include the completion of personal information and financial details.

Here is a look at the IG Group Sign Up Process as an example:. The applicant must start setup by supplying general information including a valid email address and country of residence. The next step will nee more personal information to be added, including the applicant's direct contact details and identification number.

The applicant must complete their address details to move on to the final steps of the registration process. The second last step is to complete Financial details, including the applicant's annual income and employment history. In the final step, Applicants must provide their trading history. Once this step has been completed, the application can be saved and closed. The Forex market does not have a central regulator and beginner traders should look for regulatory authorities found in their country of residence.

For example, South African Forex Brokers will be regulated by The Financial Sector Conduct Authority or FSCA. Services to consider include the trading platform on offer, available trading tools, and customer support, to name but a few. Online Forex trading can and has been a great income-generating activity but making use of the Brokers services will come at a cost.

Cost may include a minimum deposit in order to open an account, commission per trade, rollover fees, or deposit and withdrawal charges. Step 1: Open the Forex Trading Platform on offer. A trading platform refers to the software interface provided by an investor's chosen Forex broker. A trading platform gives customers to access as traders to the Forex markets.

Forex Trading Platforms may be available as an online web-based portal, a mobile app, a downloadable program, or a combination of the three. This will be depended on the Broker chosen. The next step is choosing a currency pair and opening a chart. This is done by selecting a timeframe. A forex chart will graphically illustrate the historical behavior, across a variety of time frames, of the relative price movement between two currency pairs. Next, the trader will add technical indicators to the chart opened in Step 2.

The customizable settings for technical indicators will include price, volume, and open interest. After technical indicators have been set, a trader can prepare to place the order.

Orders should be placed according to how a trader aims to trade and how they intend to enter and exit the forex market.

After an order is opened, a trader will set its stop loss and take profit levels. This is an optional but highly recommended step to take. Setting the stop loss will limit a trader's losses in case the market moves in an unexpected direction.

In turn, setting a take profit level will ensure that the trade exits profitably once the market makes an expected downward move. The next step is to submit the order and wait for the confirmation screen. The order confirmation screen is extremely important as it serves as a ticket number — which can be used as a reference. The second last step may seem like the easiest step, but it may be the most tedious of all.

Step 7 — the waiting period begins. Some expert traders recommend turning off the screen and walking away from the market once the order is entered. And finally, the trade is complete! A trader's first trade may result in either a profit or loss. Either way, it should be seen as a learning experience. Overall, Forex Trading has the potential of being profitable.

Novis traders need to understand that Forex is not a get-rich-quick scheme, nor will it be fast money and success and Profitability in Forex can and will only be achieved when an investor understands the Forex Market, Trades with the Right strategy, Selects the right Broker, and makes use of safeguards such as stop-loss orders. CFD's are offered on a range of markets. Forex trading is very often perceived as a way to make money easily, however, it is fair to say that forex trading can be quite difficult and may not be suitable for everyone.

Beginners forex traders should take note that it takes more or less one year to learn forex trading. While the technical side can be grasped in a few weeks, elements like psychology of trading and risk management take a lot longer to understand. Forex traders, and especially beginner traders should take special care when choosing a broker, because factors like pricing, execution and even the quality of customer service can make a big difference to your trading experience.

There are many people who turn to forex trading thinking that there is a lot of money to be made; however statistics reveal that most of these aspiring forex traders fail fast and some even end up losing substantial amounts of money.

There are plenty of ways you can teach yourself forex trading, etc. with books, websites, videos, forex market colleges and institutions, following well-known successful traders on social media, forex guides, webinars to name but a few. If you are a beginner forex trader a good tip is to know the fundamentals of forex trading e. Educate yourself on the forex market, Create a trading plan and stick to it, Test your trading plan with a risk-free practice account demo account , Know your limits and when to stop.

Don't let emotion overrun you, Slow and steady wins the race. Price and trade data source: JSE Ltd All other statistics calculated by Profile Data. All data is delayed by at least 15 minutes. Telephone number: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs, FX or any of our other products work and whether you can afford to take the high risk of losing your money.

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Forex Brokers. Forex Trading Platforms. Trading Platforms. Brokers by License. Brokers Types.

Forex FX is a portmanteau of foreign currency and exchange. Foreign exchange is the process of changing one currency into another for a variety of reasons, usually for commerce, trading, or tourism. Trading currencies can be risky and complex. Because there are such large trade flows within the system, it is difficult for rogue traders to influence the price of a currency. This system helps create transparency in the market for investors with access to interbank dealing. Retail investors should spend time learning about the forex market and then researching which forex broker to sign up with, and find out whether it is regulated in the United States or the United Kingdom U.

and U. dealers have more oversight or in a country with more lax rules and oversight. It is also a good idea to find out what kind of account protections are available in case of a market crisis, or if a dealer becomes insolvent. Read on to learn about the forex markets, what it's used for, and how you can get started trading.

The foreign exchange market is where currencies are traded. Currencies are important because they allow us to purchase goods and services locally and across borders. International currencies need to be exchanged to conduct foreign trade and business. If you are living in the United States and want to buy cheese from France, then either you or the company from which you buy the cheese has to pay the French for the cheese in euros EUR. This means that the U. importer would have to exchange the equivalent value of U.

dollars USD for euros. The same goes for traveling. The tourist has to exchange the euros for the local currency, in this case the Egyptian pound, at the current exchange rate.

One unique aspect of this international market is that there is no central marketplace for foreign exchange. Rather, currency trading is conducted electronically over the counter OTC , which means that all transactions occur via computer networks among traders around the world, rather than on one centralized exchange.

The market is open 24 hours a day, five and a half days a week, and currencies are traded worldwide in the major financial centers of Frankfurt, Hong Kong, London, New York, Paris, Singapore, Sydney, Tokyo, and Zurich—across almost every time zone.

This means that when the U. trading day ends, the forex market begins anew in Tokyo and Hong Kong. As such, the forex market can be extremely active anytime, with price quotes changing constantly. These terms are synonymous and all refer to the forex market. In its most basic sense, the forex market has been around for centuries. People have always exchanged or bartered goods and currencies to purchase goods and services.

However, the forex market, as we understand it today, is a relatively modern invention. After the Bretton Woods accord began to collapse in , more currencies were allowed to float freely against one another. The values of individual currencies vary based on demand and circulation and are monitored by foreign exchange trading services.

Commercial and investment banks conduct most of the trading in forex markets on behalf of their clients, but there are also speculative opportunities for trading one currency against another for professional and individual investors. There are two distinct features of currencies as an asset class :. An investor can profit from the difference between two interest rates in two different economies by buying the currency with the higher interest rate and shorting the currency with the lower interest rate.

Prior to the financial crisis, it was very common to short the Japanese yen JPY and buy British pounds GBP because the interest rate differential was very large. This strategy is sometimes referred to as a carry trade.

Currency trading was very difficult for individual investors prior to the Internet. Most currency traders were large multinational corporations , hedge funds , or high-net-worth individuals HNWIs because forex trading required a lot of capital.

With help from the Internet, a retail market aimed at individual traders has emerged, providing easy access to the foreign exchange markets through either the banks themselves or brokers making a secondary market. Most online brokers or dealers offer very high leverage to individual traders who can control a large trade with a small account balance.

The FX market is where currencies are traded. It is the only truly continuous and nonstop trading market in the world. In the past, the forex market was dominated by institutional firms and large banks, which acted on behalf of clients. But it has become more retail-oriented in recent years, and traders and investors of many holding sizes have begun participating in it.

An interesting aspect of world forex markets is that there are no physical buildings that function as trading venues for the markets. Instead, it is a series of connections made through trading terminals and computer networks. Participants in this market are institutions, investment banks, commercial banks, and retail investors. The foreign exchange market is considered more opaque than other financial markets. Currencies are traded in OTC markets, where disclosures are not mandatory.

Large liquidity pools from institutional firms are a prevalent feature of the market. A survey found that the motives of large financial institutions played the most important role in determining currency prices. Forex is traded primarily via three venues: spot markets, forwards markets, and futures markets.

When people refer to the forex market, they are thus usually referring to the spot market. The forwards and futures markets tend to be more popular with companies or financial firms that need to hedge their foreign exchange risks out to a specific date in the future. Forex trading in the spot market has always been the largest because it trades in the biggest underlying real asset for the forwards and futures markets.

Previously, volumes in the forwards and futures markets surpassed those of the spot markets. However, the trading volumes for forex spot markets received a boost with the advent of electronic trading and the proliferation of forex brokers.

The spot market is where currencies are bought and sold based on their trading price. That price is determined by supply and demand and is calculated based on several factors, including current interest rates, economic performance, sentiment toward ongoing political situations both locally and internationally , and the perception of the future performance of one currency against another.

A finalized deal is known as a spot deal. It is a bilateral transaction in which one party delivers an agreed-upon currency amount to the counterparty and receives a specified amount of another currency at the agreed-upon exchange rate value.

After a position is closed, the settlement is in cash. Although the spot market is commonly known as one that deals with transactions in the present rather than in the future , these trades actually take two days for settlement.

A forward contract is a private agreement between two parties to buy a currency at a future date and at a predetermined price in the OTC markets. A futures contract is a standardized agreement between two parties to take delivery of a currency at a future date and at a predetermined price. Futures trade on exchanges and not OTC. In the forwards market, contracts are bought and sold OTC between two parties, who determine the terms of the agreement between themselves. In the futures market, futures contracts are bought and sold based upon a standard size and settlement date on public commodities markets, such as the Chicago Mercantile Exchange CME.

In the United States, the National Futures Association NFA regulates the futures market. Futures contracts have specific details, including the number of units being traded, delivery and settlement dates, and minimum price increments that cannot be customized. The exchange acts as a counterparty to the trader, providing clearance and settlement services. Both types of contracts are binding and are typically settled for cash at the exchange in question upon expiry, although contracts can also be bought and sold before they expire.

The currency forwards and futures markets can offer protection against risk when trading currencies. Usually, big international corporations use these markets to hedge against future exchange rate fluctuations, but speculators take part in these markets as well.

In addition to forwards and futures, options contracts are also traded on certain currency pairs. Forex options give holders the right, but not the obligation, to enter into a forex trade at a future date and for a pre-set exchange rate, before the option expires. Unlike the spot market, the forwards, futures, and options markets do not trade actual currencies. Instead, they deal in contracts that represent claims to a certain currency type, a specific price per unit, and a future date for settlement.

This is why they are known as derivatives markets. Companies doing business in foreign countries are at risk due to fluctuations in currency values when they buy or sell goods and services outside of their domestic market. Foreign exchange markets provide a way to hedge currency risk by fixing a rate at which the transaction will be completed.

To accomplish this, a trader can buy or sell currencies in the forward or swap markets in advance, which locks in an exchange rate. For example, imagine that a company plans to sell U. Unfortunately, the U.

dollar begins to rise in value vs. A stronger dollar resulted in a much smaller profit than expected. The blender company could have reduced this risk by short selling the euro and buying the U. dollar when they were at parity.

That way, if the U. dollar rose in value, then the profits from the trade would offset the reduced profit from the sale of blenders. If the U. dollar fell in value, then the more favorable exchange rate would increase the profit from the sale of blenders, which offsets the losses in the trade. Hedging of this kind can be done in the currency futures market. The advantage for the trader is that futures contracts are standardized and cleared by a central authority.

However, currency futures may be less liquid than the forwards markets, which are decentralized and exist within the interbank system throughout the world.

Factors like interest rates , trade flows, tourism, economic strength, and geopolitical risk affect the supply and demand for currencies, creating daily volatility in the forex markets. A forecast that one currency will weaken is essentially the same as assuming that the other currency in the pair will strengthen because currencies are traded as pairs. The trader believes higher U. If the investor had shorted the AUD and went long on the USD, then they would have profited from the change in value.

Forex Trading in South Africa,Understanding Currency Pairs

Understanding Trading. This series of articles starts with an essential guide on the basics AdMake The Most Of Today's Market Action. Trading is Risky. Trade Stocks, Indices, Forex, Commodities & More With An Experienced, Trustworthy Broker AdStart Trading with one of the leading brokers you choose, easy comparison! We Checked All the Forex Brokers. See The Results & Start Trading Now!blogger.com has been visited by 10K+ users in the past month AdOnline trading: how to start investing today. Open a demo account and start practicing. Choose between the best regulated and certified platforms to operate blogger.com has been visited by 10K+ users in the past monthFree Demo Account · Legit Online Brokers · 0 Commission · Safe Investment Platforms AdTrade Forex CFDs With Real Time Quotes! Capital at Risk. Seize New CFDs Opportunites! Trade from your Mobile and Tablet Forex, also known as foreign exchange or FX trading, is the conversion of one currency into ... read more

Gapping is common in stock markets, but the forex market is so liquid, that you see little gapping atleast in case of major currency pairs. Online Forex trading can and has been a great income-generating activity but making use of the Brokers services will come at a cost. The best way to get started on the forex journey is to learn its language. Let's understand this with an example. After a position is closed, the settlement is in cash. But it has become more retail-oriented in recent years, and traders and investors of many holding sizes have begun participating in it. Avatrade Review 2.

Chapter 4 Forex Trading Strategies. A trader must understand the use of leverage and the risks that leverage introduces in an account. These cookies ensure basic functionalities and security features of the website, anonymously. Forex Trading Platforms may be available as an online web-based portal, a mobile app, a understanding forex trading program, or a combination of the three, understanding forex trading. Similarly, a bad news or policy change by the central bank of the country would likely affect the currency' price's exchange rate in the short term as well as long term. This platform is owned by MetaQuotes Software Company.

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