Forex Trading is getting popular among the public, especially since the introduction of trading CFDs (Contracts for Different). CFDs are a financial instrument that is traded on margin or collateral. In CFD trading, enables investors to trade financial products without the need to have a physical, such as an index or commodity.

Derivative Instruments In Forex Trading

Trade CFDs (Contract For Different) in forex trading using derivative instruments, namely the reimbursement agreement with the decrease in the value of the principal reference product, or often referred to as derivative products. Therefore, the CFD in the transaction, an investor has the full risks and benefits of financial instruments in question without having to pay all of nominal value of the instrument. In other words, an investor needs to pay only margin or collateral in a certain amount of value to trade in a number of financial instruments.

In currency trading, or often known as forex trading have used instruments of CFDs (Contract For Different), which provide facilities in the form of leverage. In Forex Trading, leverage can also be understood as power bob up, the ratio used to determine the margin or collateral in the transaction. The ratio is multiplied by the value of the contract. For instance, by setting a leverage of 1:400, for transact forex trading 1 lot, for example, 1 lot = 10,000, then the margin or collateral used is (1:400) x 10,000 = 25 units traded currency (example 25 USD , if trading in USD).

What is Forex Trading?

Forex or Foreign Exchange, is the largest financial market in the world, with a trade value of more than 3 trillion USD per day. The forex market has no centralized trading arena, so that the transaction can be carried out independently or over the counter, either by phone, internet, banking networks, multinational corporations, importers and exporters, brokers and currency traders. All components can be involved in forex trading, especially in the era of technological advancements such as this, where the global internet access is available easily.

Basic Concepts of Forex Trading

Forex trade is basically selling / buying of a currency and buy / sell other currencies at the same time. For example, the currency pair USD / JPY, if the investor buys USD means that at the same time investors are concerned also sell JPY, and vice versa. Usually the major currencies, which consists of the British Pound (GBP), Euro (EUR), Japanese Yen (JPY), and Swiss Francs (CHF), the currency traded against the U.S. dollar (USD). But there are times when the trading partner does not include elements USD, or the so-called cross pairs, for example EUR traded with JPY (EUR/JPY).

Currency Pairs In Forex Trading

In forex trading, the currency pair is shown with the base currency and offerings currency. The base currency pair shown in the first part, while the offerings currency or quote currency shown in the second part. For example, the currency pair EUR/USD, so the EUR is called base currency and USD is offerings currency or quote currency. Similarly the currency pair USD/JPY, the USD as the base currency and JPY as the offerings currency (the quote currency). The base currency has a higher value than the currency offers.

Bid / Ask In Forex Trading

Bid/Ask is the quota price of the currency pair. For example, EUR/USD: 1.2836 1.2839. The first number, 1.2836 indicate the bid price, the cost of selling the Euro against the U.S. dollar, or commonly referred to as going short on the euro. While the second number, 1.2839 suggests the ask price, which is the cost of buying the Euro against the U.S. dollar, or commonly referred to as going long on the Euro. The difference between the bid and ask prices is called the pip spread, in the above example pip spread of 1.2836-1.2839 = 3.

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