FX TradingBy Priya of Adsenselover.com
Trading money in the global markets can be great way to make more of it,
but it can also be a lesson in how to lose money quickly. More than $1 trillion is traded
every day on the foreign currency exchange (Forex), and yet no centralized headquarters or
formal regulatory body exists for this form of trade. Foreign currency exchange is regulated
through a patchwork of international agreements between countries, most of which have some type
of regulatory agency that controls what goes on within their respective borders.
Thus, the foreign currency exchange actually is a worldwide network of traders who are
connected by telephone and computer screens.It is very important to understand money jargon
in FX trading. The world of foreign currency
exchange has a unique language of its own.
Prices are quoted two ways, meaning that when one
trader talks price with another, they state their respective prices in terms of what exchange
rate they will pay to buy it and what they will take when selling it. Bid and ask price
differences, or spreads, usually are stated in pips or hundredths of a currency units.
Spreads normally are no more than ten pips.
Pips are the smallest incremental price movement permitted in the currency market.
Although most transactions deal in thousands or millions of dollars, yen, Euros or other
currencies, and a one-cent spread can equal thousands of dollars, most currency price quotes
nevertheless are extended out to four decimals. Many times, traders quote only the last two
digits or the small numbers, because the incremental changes are so small only the last two
digits matter. As a trader in FX trading you need to think in terms of the host currency when
receiving a quote for direct exchange, which would be an exchange based on the value of the
host country’s currency.
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