The field of forex trading differs considerably from trading of other financial instruments and commodities. Forex trading is considerably not the same as stock, bonds and futures trading. Understanding the basics of this market is very important for a trader to learn in the market.
The largest Financial Market: The daily trading volume of the currency market exceeds 4 trillion $ $ $ $ and by far it is the largest financial market exists in the known universe. The main players from the market are banks including central banks. They carry out the majority of the big transactions of the market. The retail traders contribute a small sector from the market, however the contribution is growing swiftly through the years due to the ever increasing popularity of forex trading.
Round the Clock Trading in Sessions: The planet forex trading market is open Twenty-four hours a day from Sunday evening to Friday evening GMT. However the transaction volume in intraday trades show great variations as there are three major trading sessions as Asian session, European session and North American or US session. It comes with an overlapping of Asian and European sessions and also European and US sessions where the trading volumes can be quite high. And, there is a considerable gap between US session close and also the start of Asian session where the trading volumes can be very low. The currencies of countries in the particular region are most traded once the regional session is open.
Over-The-Counter Trading and Currency Pairs: Currencies are traded in pairs. It's possible to buy a currency by selling another. The cost relation between your two currencies may be the exchange rate or the cost of the happy couple and is priced up to your fourth decimal point. The smallest price change easy to a pair is known as pip and it generally equals 1/100 of 1% from the exchange rate. The trades are executed over-the-counter meaning directly between your buyer and seller; there aren't any centralized exchanges or regulatory bodies for forex trading.
The Three Types of Lots and their effects on trading: Forex trades are carried out in lots. Presently there are three types of lots available to retail traders as standard lot, mini lot and micro lot. A typical lot is the position size that equals $100000, a mini lot equals $10000 and a micro lot equals $1000. When trading with standard lots, a pip difference in price can cause $10 profit or loss. Similarly with mini lots the same can cause $1 change with micro lots a ten cent ($0.10) change. Plus it ought to be noted that the accessibility to the types of lots varies with broker since many brokers only offer standard and mini accounts.
The Most Popular Currencies: However, there are countless currency pairs readily available for trading, most volume is contributed by only 18 currency pairs comprised of eight most popular currencies. These currencies include USD (US Dollar), EUR (Euro), GBP (British Pound), JPY (Japanese Yen), CHF (Swiss Franc), CAD (Canadian Dollar), NZD (Nz Dollar) and AUD (Australian Dollar). Retails traders also prefer these currencies as they are most liquid.