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For those of you who are still laymen, ask questions about how to play forex? Many people can find, buy currencies at low prices, then sell at high prices. To get benefits, and forex trading methods are summarized in 10 points after this.
1. Forex trading can be done anytime and anywhere
The opening time of the forex market is divided into several major trading sessions, namely: Sydney (Australia) Session, Tokyo (Asia) Session, London (European) Session, New York (American) Session. These trading sessions open one after another, so as if forex trading takes place without stopping.
This fact has a big influence after the birth of the online forex trading method, because it means forex traders around the world can trade 24 hours a day for 5 days a week. You can trade forex before going to the office, before going to bed at night, or even during work breaks.
2. Online Forex Trading Require Internet Access
Before entering the discussion about forex trading, it is necessary to know what supporting infrastructure is. To be able to trade forex online, you need a computer, laptop, or smartphone; as well as an Internet connection. In addition, forex trading platform software is also needed that can be downloaded and used for free.
Where can you get the software for forex trading? Companies called forex brokers that will connect you as a trader to gain access to the market. So, the first step in the procedure for how to trade forex is to register with a particular broker, then download the trading software it provides.
If you want to experiment with how to play forex and don't want real trading, you can also register for a forex demo account first. Forex demo accounts can be obtained for free from any broker, and you can use them to trade with virtual funds (no need to deposit any real funds). While the material learning how to trade forex can also be freely and freely accessed from the internet, including on the site aroundforex.com that you are referring to.
3. Currency is traded in pairs
Not only men and women created in pairs. Forex trading is also done in pairs (pair). In forex trading, we will sell or buy currencies, and that is certainly done between two different currencies. Therefore, mention is always paired, where a stronger currency will be in front. For example the US Dollar with the British Pound which is abbreviated GBP / USD. Or the US Dollar with the Japanese Yen becomes USD / JPY.
There are basically eight currencies that are most commonly traded in the forex market. The eight currencies are called major currencies which consist of:
- The US Dollar (USD) is also called "Greenback" or "Buck".
- Euro (EUR) is also called "Single Currency" or "single currency 18 countries"
- Japanese Yen (JPY)
- British Pound (GBP) nicknamed "Sterling" or "Cable"
- Australian Dollar (AUD) nicknamed "Aussie"
- New Zealand Dollar (NZD) nicknamed "Kiwi"
- Canadian Dollar (CAD) nicknamed "Loonie"
- The Swiss Franc (CHF) was nicknamed "Swissy"
These currencies are usually paired and traded with each other (cross), and include the ranks of the most traded and traded currency pairs in the world. There are also so-called exotic pairs (exotic pairs. For example US dollars with Singapore dollars (USD / SGD). However, exotic currency trading is rare in the forex market, because usually volatility and trading costs will be very high, so the risk of loss is greater. rather than profit potential.
Because currencies are traded in pairs, then in forex trading, when we buy (Buy) one currency, we automatically sell (Sell) the currency that is the companion. For example, the Euro vs Dollar pair, as shown in the picture below:
The currency that appears in front of the slash is known as the base currency or in this case EUR, while the currency behind the slash is usually called the counter or quote currency or in this case USD.
If the order we do is "buy", the exchange rate tells us how much we have to pay using the quote currency to get the base currency. It's easier, let's use the example above. To buy EUR 1, we have to pay USD1.4746.
When we do "sell", the exchange rate tells us how many units of the quote currency we will get when selling one base currency unit. If using the example above, that means we will get USD 1.4745 when selling EUR 1.
To make it easier to understand about currency pairs and how to trade forex using it, we simply memorize the key: the base currency is "base" or "base" for our "buy" or "sell" orders. So ... when we buy EUR / USD, that means we buy Euros and sell US Dollars; and if sell EUR / USD means sell Euro and buy US Dollar.
4. Forex traders can profit when prices rise or fall
Basically playing forex is done by looking at market conditions, then predicting whether the value of a currency pair (price) will rise or fall. The prediction is then executed by opening a trading position (entry or open position). In the way of forex trading there are only two types of positions known, namely:
Buy (Buy / Long Position): Buy position is opened if the price of a currency pair is predicted to rise.
Buy position means that we want to benefit from rising prices on a currency pair. So if you want to Buy, we have to make sure the value of the base currency will increase. After buying at a low price level, we will close the position (close position) at a higher price.
Sell / Short Position: A Sell position is opened if the price of a currency pair is predicted to be DOWN.
A Sell Position means we want to benefit from a price decline. So, if you want to sell, we have to make sure that the value of the base currency will decrease. We buy at a high price level, then close that position after the base currency value is lower than the opening value.
Because in the way of forex trading there are two types of positions, the forex trader has the opportunity to get a profit, both when the exchange rate of a currency strengthens or weakens. Very interesting, isn't it !?
5. In Forex Trading There are two types of prices
Have you ever entered Money Changer to exchange foreign exchange (forex)? There are two types of exchange there, namely the selling rate and buying rate. Likewise in forex trading, all price quotes are written in two prices: bid and ask. Bid prices are usually lower than the ask price.
To understand it, let's look again at the price quote that was:
The bid price is the price at which the broker is willing to buy the base currency and sell the quote currency. This is the price we use if we will sell a currency pair.
The ask price, or sometimes also referred to as an offer, is the price at which the broker is willing to sell the base currency and buy the quote currency. That is, the ask price is the price we use if we are going to buy a currency pair.
In the example above, we have the option to sell Euro at the price of 1.4745 or buy Euro at the price of 1.4746. The difference between the bid and ask price is called a spread, and this is one part of the reward that a trader gives to the broker as a reward for providing trading software and connecting to the market.
6. Price Movement Count Based on Pip
In forex trading, price movements are calculated from the start of a number behind the comma. This price movement unit is referred to as "pip". Or in other words, pip is a unit of measurement that shows the change in value between two currencies. For example, the USD / JPY pair moves from 91.23 to 91.24. Well, this increase in 0.01 is called ONE PIP.
Pip is usually the last decimal which is in a quoted currency value. Generally forex pairs appear with 4 decimal numbers, but some pairs (like Japanese Yen cross pairs) have 2 decimal places.
Along with the development of financial technology, more brokers also provide trading facilities that can monitor price movements up to smaller fractions. Therefore, not all brokers use quotations 4 and 2 digits; there are also brokers who use 5 and 3 digit quotations. Well, brokers basically use "fractional pips" or also called "pipettes". For example, if USD / JPY moves from 91.234 to 91.237, then that means there is a change of 0.003, or equal to 3 pipettes.
Got it !? Well, now the question is, how to calculate profit from pip? Because each currency has its own exchange rate, then the way to calculate the pip value for each pair continues to change along with the fluctuation of the exchange rate. Consider the following example:
Nobita has an account at the DoraFX broker that provides four-digit quotes. There, he will trade USD / CAD. At that time, the USD / CAD exchange rate was 1.0200. The exchange rate can be read as: 1 USD / 1,0200 CAD. Here, one pip change means a change of 0.0001 CAD. So that the value of the dollar per pip per unit traded:
= (0.0001 CAD) x (1 USD / 1,0200 CAD)
= (0.0001 CAD / 1,0200 CAD) x 1 USD = 0.00009804 USD per unit
With that example, if Nobita trades 1 mini lot in a USD / CAD pair, where 1 mini lot = 10,000 USD, then the dollar value per pip is approximately 0.98 USD. (Read more: Calculating the Advantages and Disadvantages of Pips in Forex)
Puyeng? Don't worry, when trading later we don't need to worry about pip or pipette calculations. The trading platform can do all the calculations for us automatically. Seputarforex.com also has a pips calculator that you can use.
7. No big capital needed because there is leverage and margin
In financial markets, in addition to ordinary trading, the term "Margin Trading" is also known. Margin Trading allows us to trade forex with much less capital than is actually needed to access the forex market. Indeed, it takes millions of dollars to participate in playing forex like the big players. However, Margin Trading makes us able to take part in this very profitable market.
Margin Trading is the activity of trading financial assets using funds borrowed from brokers, after we have given a number of funds as a "guarantee" to the broker. However, despite "borrowing funds", we do not have to pay interest to brokers. Why so? because forex trading is non-physical trading, meaning that brokers do not need to hand us a bundle of 10,000 euros. We as traders also have to pay trading fees in the form of spreads and commissions on brokers.
To clarify, consider the example of trading without margin (1: 1 Margin) below:
It is known today that the exchange rate of EUR / USD is 1.5712 which means 1 Euro is equal to USD1.5712. And the next day the currency pair experienced a movement of points to 1.6712. For example, we buy 100 Euros, then the profit we will get is calculated as follows (1.6712 - 1.5712) x 100 Euro = 0.01 x 100 = 1 Euro.
You know, the profit is only 1 Euro, then what is interesting about forex trading? Yes, the capital is small, only 100 Euros. Imagine if we deposit more capital, 10,000 euros for example. So if it's calculated again, with a deposit of that size, the profit can be 100 Euros! If exchanged with IDR 100 Euro x IDR 15,000 = IDR 1.5 million! Wow, it's OK too!
From the example case above, maybe some of us have argued, "A deposit is that big but the profit is only 1% percent? We die-die
8. Margin Like a Double-Edged Sword
From the description in the previous section, of course it can be concluded that the existence of leverage and margin benefits traders. However, this is actually a double-edged sword that must be used wisely.
The problem is, margins disguise how much of our capital really is, so even when a large loss can be felt. For example in the example above. Thanks to a 1% margin, enough with 100 Euros of capital, we can get 100 Euros in profit. But, if EUR / USD does not rise from 1.5712 to 1.6712, but instead it drops to 1.4712, then we will lose 100 Euros in cash.
Therefore, it is advisable to use leverage and moderate margins, around 1: 100-1: 200 if it is still common about how to trade forex. In addition, we must pay attention to the following important terms when trading forex:
Margin Requirement / Margin Required: same as the definition of "margin" above, this means that the amount of money we need to submit to the broker is to be able to trade forex.
Account Margin: the total money we have in our "account" or account at the broker.
Used Margin: part of the money in our account that is "locked" by the broker to maintain the current trading position. We cannot tamper with this Used Margin until our trading position is closed (Close Position), or subject to Margin Call.
Usable Margin: part of money in our account that is free to be used for sale, aka open a new trading position.
Margin Call: if the amount of money in our account cannot patch the possibility of loss (loss), or when the amount of capital that we have is lower than the Used Margin, then the current trading positions will be automatically closed by the broker in accordance with the market price. Having a Margin Call (MC) means that we have clearly lost.
If you already understand these terms, then we can anticipate the possibility of inadequate margins or even suffer losses in excess of the availability of our capital. Keep in mind, the risks in forex are inevitable, but can be controlled, including the risk of insufficient margin.
9. Online trading does not need to be continuous online
Technology has made the way of online forex trading in such a way as to make it easier for us as traders. For example, after opening a trading position, we do not need to glare at the computer merely while waiting for the position to reach the profit target. We simply place instructions on the platform, at the price of what the target profit is considered to be achieved and the trading position must be closed. Later, even if we are relaxing watching movies in the cinema or busy working in the office, the trading position will be closed automatically and profits will be immediately entered into the account.
Through similar methods, we can also prevent fatal losses due to Margin Call. This is done by installing Stop Loss to close the losing trading position, before reaching the limit of margin availability. Therefore, even though we do not observe the market continuously, we can still prevent unwanted losses. Very practical, this is the ease of how to trade forex today.
10. Open a Trading Position Doesn't Have to be at Current Prices
If, based on various forex analyzes that have been done, you predict the price in EUR / USD will increase in the long run, but the current price you consider less low or not yet potential to open a Buy position because it can still go down again. What to do? Should you monitor the computer continuously to check the latest EUR / USD price? Of course not necessary.
In the forex trading platform provided by brokers, various types of instructions are available. In addition to instructions to close trading positions automatically, there are also various types of orders, such as: sell if the price is above the current price (Sell Limit), buy if the price is below the current price (Buy Limit), and so on. This can be witnessed and tried directly on the trading platform, even if you only have a forex demo account.
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