Basic Trading Knowledge of Forex
Those people who are dreaming to boom their earning within in a short time, Forex is the correct place for them. But, one thing should be kept in mind that where there is a chance of earning a handsome money, there is also chance of loosing money. Forex can make you rich within in a short time. Again , it can snatch from you what you have. Forex is a risky business, but if you have sufficient knowledge about trading you can be successful. Before starting Forex you need to make some analysis. To understand Forex you need some basic knowledge.
Forex Trading Basic:
- There are two types of currencies- Base currency and Quote currency. Base currency is that currency which you are selling and Quote currency is the currency that you are purchasing. You can buy 1 currency in exchange of another currency such as- Dollars with Pound.
- In Forex, you will see exchange rate which can tell you how much you need to spend to purchase a base currency. An example can clear your confusion. If you want to buy Us Dollar with British Pound you can see exchange rate like this GBP/USD= 1.450. This means you can buy 1.450 Dollars with 1 British Pound.
- If you want to buy base currency and sell the quote currency you can see the term long position which means you want to sell US Dollars and buy British Pound.
- A short position means you want to sell base currency and buy quote currency. That means,you would spend British Pounds to buy US Dollars.
- If your broker is willing to buy base currency in exchange of quote currency that is called bid price. It is the best price in which you want to sell your quote currency.
- There is another term that is offer price which your broker want to sell base currency in exchange of quote currency.
- And the last one is spread which is the difference between ask price and bid price.
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