The essence of currency trading is that the purchase of one currency is accompanied by the sale of another currency. That is the reason why forex trading currencies are listed in pairs. The fact that foreign exchange is listed and traded as a currency pair entails unique characteristics. Anyone who trades on the Forex market is speculating on a price change. More precisely, which currency will increase in relation to the other. About the exchange rate change, the dealer wants to realize a profit.
For currency pairs in the Forex area, the currency to the left is the trading currency. On the right side you will find the price currency. From the price currency, the value can be read that it has against 1 unit of the trading currency.
For example, trading EUR / USD at 1.16000 means: 1 Euro equals 1.16 US dollars. The trading currency forms the basis for the buy or sell position.
If a trader assumes that the price of the euro will gain value against the dollar, he buys the currency pair EUR / USD. The transaction in detail means: He buys Euro (trading currency) and in turn sells US dollar (price currency).
Conversely, where a trader assumes that the value of the euro is falling to the US dollar, he will trigger a SELL on the EUR / USD currency pair, sell the euro and buy US dollars at the same time.
Ask the forex broker bit ask price
To benefit from the forex market, the person interested in Forex must open an account with a broker of their choice. A forex broker offers prices for currency pairs traded on his behalf. As the best forex broker is a provider suitable for beginners, because the optimal trading conditions for forex proves and provides for practicing a demo account.
When looking at the forex price feed at the broker, two different pricing details for each currency pair are displayed as Ask and Bid.
Bid (in English “offer”) stands in the currency trading for bid price or purchase offer. The bid price represents the price the trader must pay if he wishes to sell a currency.
- Bid: A financial instrument is to be sold. The dealer offers it to the market. When selling this course applies.
Ask (in German “ask”) stands in forex for offer price or price quote. The ask price is the price that the dealer has to pay if he intends to buy a currency.
- Ask: question about the price of a trading instrument. What is to be paid for an Underlying at the current price!
The ask price always represents the higher value compared to the bid price. The difference between the ask and bid price is the spread (or bid-ask spread). The spread includes the trading costs and brokerage commissions.
When and where is Forex traded?
The forex market has different trading hours than the stock market or other financial markets. Currencies can be traded five days a week, 24 hours a day. Forex trading will take place on Monday morning with the opening of the Australian financial markets until the closing of the American markets on Friday evening.
During each trading day there are four main trading hours for certain currencies:
- Sidney / Australia (AUD, NZD)
- Tokio / Asien (JPY)
- London / Europa (GBP, EUR, CHF)
- New York / Nordamerika (USD, CAD)
When choosing the trading Forex pairs, a trader needs to know that own trading hours results in larger movements in the respective currencies. This means that EUR / USD moves most during the London and New York Stock Exchanges. At the same time, there is an overlap of two trading sessions. In the USD / JPY currency pair, stronger moves focus on trading sessions in New York and Tokyo. AUD / USD moves higher during the session in Sidney and New York.
Effects of news on currency trading
News and macroeconomic events are having a strong impact on currency and forex prices. Because forex traders owe gains and losses to price movements, they have to keep track of important news. This also applies to purely technical traders. Before, during and after the publication of the news, the right trading decisions can be made.
In these phases, traders have a few choices. Experts advise against setting new trades ahead of important news. If a course gets close to the take profit line, the position should be closed and profits should not be lost. It is best to not set new trades immediately when the news is announced, but one hour later so that greater volatility settles to a normal level.
Conclusion: Basics on forex trading are important for basic understanding
The basics for forex trading are not limited to the statements made in our guide. What is important is that traders know: what the forex market is and why doing so makes sense there. This knowledge is not enough for a first forex trade. There are many terms around Forex trading that a trader should know about. On t terms in the glossary are usually well explained. We recommend every trading interested person to use the demo account of his broker extensively.
Forex trading is done electronically and not via a stock exchange. In return for the normal financial institutions, which are interconnected, the private trader needs a Forex account for foreign exchange trading. More than two dozen specialized forex brokers provide trading platforms to German traders. As a broker, providers are recommended that are regulated in Europe and have to comply with ESMA regulations (maximum leverage 30: 1). For beginners, Asian and Australian brokers are more risky, with leverage up to 500: 1.