Forex trade

Forex trade

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Now that we know what trade, it remains to understand the mechanism of trade in the Forex market.

Transactions that are conducted in the Forex market is a position. Accepted provide two types of positions:

Position for purchase in English – BUY (read as “Bai”) that can be opened, based on the growth of the exchange rate;
Position on sale in English – SELL (read as “SELL”) that can be opened, based on the drop in the exchange rate.

Just note that the purchase is also called “long position”, as noted, the course is usually long and slowly growing. Conversely, sales are called “short position”, as the decline in exchange rates often occurs rapidly and intensely.

So:
– If the price increase is expected for the euro against the US dollar, and thus the growth rate of euro / dollar, should be open BUY position on the pair EUR / USD (buy euros for US dollars);
– If you intend to decrease value of the euro against the US dollar, and thus the depreciation of the euro / dollar, should be open SELL position on the pair EUR / USD (sell euros for US dollars).

The above considerations are equally valid for all currency pairs. Thus, the trader is able to work in two directions – to earn both the growth and the fall in exchange rates. So you finally secured the decision tree, look at the picture presented by:

And now let us remember that the value of the exchange rate declared by the seller or the buyer, ready to make a deal at this point in time, called the currency quotation. In addition, for each currency pair is always presented two quotes:

ASK (Ask or Offer) – The price at which a trader can buy the base currency broker quotations;
bid (Bid or Last) – the price at which the trader can sell the base currency broker quotes.
Take a look at a typical representation of quotes:
Now we see that the EUR / USD = 1.2484 / 86 (this shorthand Bid and Ask is also often used). This means that a trader can buy euros for US dollars at the price of Ask = 1.2486, or may sell euros for US dollars at the price of Bid = 1.2484.

Please note that the sales price (bid) is always less than the purchase price (Ask). The difference between the purchase and sale of call spread – a traditional commission per transaction in any financial market, the more familiar to us on the currency exchange. The spread can be either fixed (constant), and floating, that is a little change with time. The size of the spread is usually due to the liquidity of the currency pair (commercial activity) and internal conditions of a broker. In general, at any time spread is considered as follows:

 

 

 

 

 

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