Assets are priced in units of currency. For instance, if you live in the UK and want to buy a house, it will be priced in British pounds. Assets like oil and gold are usually priced in US dollars. But how would you price the value of the currency itself? The value of all currencies is relative. This is because to determine how much a currency is worth it has to be compared against another currency. Forex exchange rates work precisely in this way. Essentially, a forex exchange rate quote tells you how much of one currency can be purchased with one unit of another currency. The price quoted for a forex pair like EURUSD is the price of US dollars in Euros. The first currency in the pair (EUR) is known as the base currency, the second currency in the pair (USD) is known as the quote currency. All currency quotes are informing you of how much of the quote currency you are able to purchase with a single unit of the base currency. In the case of the EUR/USD exchange rate, EUR is the base currency and USD is the quote (or counter) currency. If the exchange rate is 1.12, this means that 1EUR buys you 1.12USD.
FX rate is the price you see quoted for any FX pair. In the case of EURUSD, if the price being quoted is 1.12, then that is the FX rate for EURUSD. It basically means that you can buy 1.12USD with 1EUR, or that 1EUR is worth 1.12USD.
Forex charts are graphical representations of the past and present price action of any forex currency pair. Charts work in the same way regardless of what asset is being charted, whether it’s a currency pair, stock, precious metal or a cryptocurrency. The essential information that every price chart includes is the opening and closing price for the time frame being charted, as well as the high and low the price reached within that time frame. Candlestick charts are by far the most popular type of chart that traders use, this is because candlestick charts are particularly good at helping traders to observe open, close, high and low data at a glance in a very clear and appealing way. Traders use forex charts to view the fluctuating prices of the currencies that they are trading. This is because charts are a great help when it comes to visualizing the performance of a certain asset and deciding when to enter and exit the market.
A pip, or percentage in point, is the smallest incremental change a currency can undergo in value. Traditionally this was calculated to the fourth decimal place, so a pip would be 0.0001 of any currency being charted (except the yen, which has traditionally been calculated to 2 decimal places). The computer revolution led to traders wanting a higher degree of accuracy in their pricing, so most currencies are now quoted to five decimal places (three decimal places in the case of the yen).
Forex trades around the clock throughout the work week. It is a 24 hour market that is traded all around the globe. The global forex market comprises three trading sessions that overlap throughout the day as different regions open for business. The first trading session is the Asian session, which starts at 8am local time in Sydney on Monday morning. This is followed by the European session in the middle of the trading day. It ends with the North American session at 5pm local time on Friday afternoon.
People have made a great deal of money trading forex, however, this does not make it a get rich quick scheme. Trading is one of the most involved and demanding activities and in the forex market this is even more so, especially since forex is the largest and most liquid market in the world with over $5 trillion exchanging hands every single day.
You can start trading forex with very little because FX is a leveraged product that doesn’t require you to invest the full amount for every position that you take. However, the leveraged nature of FX trading is not without its risks, which is why the smaller your account is and the more leverage you use, the more risk you are taking on. At EverFX the minimum deposit for an entry level trading account is $250. We believe this to offer a good balance between risk and accessibility.
Forex trading involves speculating on rising and falling currency prices. Every currency pair tells you how much of one currency you can buy with another. These differences allow traders to speculate on the fluctuations between currencies, buying EURUSD, for instance, when they believe that the euro will outperform the dollar and selling EURUSD when they believe that the dollar is to outperform the euro.
To start trading forex you must register for a trading account. At EverFX we have streamlined this process to make it incredibly easy for you. Simply press the sign up icon in the top right of the screen and fill in your details to create your account. Once you have verified your email address you will be granted access to our education center where you can read ebooks and watch video courses on every aspect of trading. You can also download our MT4 platform and start practicing to trade on demo. When you are ready to trade with real money you can verify your account by submitting proof of ID and proof of residence documents and make your first deposit.