Trading Forex

Forex, also referred to as FX, and Foreign Exchange, is the world’s most widely traded market. It is an exceptionally liquid and volatile market, where you can trade major, minor, and exotic pairs, 24 hours a day, 5 days a week. FX Trading is always done with currency pairs, where one currency is sold, and another is bought. This is why forex prices are always quoted in pairs. Forex trading is conducted as a contract for difference (CFD), where you don’t need to own the underlying currency to speculate on its price movements. Use a forex demo account to familiarise yourself with forex trading and the trading platform.

Currency pairs open every Monday at 00:00 (server time) and close on Friday at 00:00 (server time). The forex market opens at the start of the Sydney session and closes with the close of the New York session. There are 4 major forex trading sessions – Sydney, Tokyo, London and New York. The forex market remains open because of the different time zones between the various regions across the world.

A currency pair is made up of a base currency and a quote currency. The price of the base currency, which is the first currency in the forex pair, is quoted in terms of the quote currency or the second currency in the pair. For example, if you wish to trade the euro against the US dollar, the forex trading platform will display the pair with the abbreviations of their names, such as EUR/USD. Here, the euro (EUR) is the base currency while the US dollar (USD) is the quote currency. In this case, if the price is given as 1.0410, it means that you will be able to buy $1.041 for €1.

The most frequently traded forex pairs are known as major pairs. All these pairs consist of the US dollar as one of the currencies. The most popular major pairs are:

 

·         EUR/USD (euro/US dollar)

·         GBP/USD (Great British pound/US dollar)

·         USD/CHF (US dollar/Swiss franc)

·         USD/JPY (US dollar/Japanese yen)

·         AUD/USD (Australian dollar/US dollar)

·         NZD/USD (New Zealand dollar/ US dollar)

·         USD/CAD (US dollar/Canadian dollar)

Minor FX pairs are those that do not consist of the US dollar. These pairs are also called “cross-currency pairs” or “crosses.” The most popularly traded minor FX pairs include the Euro, British pound and Japanese yen. The most commonly traded minors are:

 

·         EUR/GBP (euro/Great British pound)

·         EUR/JPY (euro/Japanese Yen)

·         GBP/JPY (Great British pound/Japanese yen)

·         GBP/CAD (Great British pound/Canadian dollar)

·         CHF/JPY (Swiss franc/Japanese yen)

·         EUR/AUD (euro/Australian dollar)

·         NZD/JPY (New Zealand dollar/Japanese yen)

Forex pairs are traded in terms of specific number currency units being bought or sold. This size of the trade is known as a lot. A standard lot is 100,000 units of a currency.  However, with Invaxa, you can trade micro lots as well, which is 100 units of a currency. As a beginner, you can start with smaller lots and slowly increase position sizes as you gain experience. You can also trade the forex markets on a demo account to learn the ropes before entering the live markets.

Percentage in points or pips are the smallest change in value of a forex rate. It is denoted in terms of the fourth decimal place for most currency pairs. For example, the EUR/USD rate might be 1.0410. A rise in price of one pip would take the rate to 1.0411. So, 0.0001 is the size of one pip. The only exception is the Japanese yen, which is denoted up to two decimal places alone. For example, the USD/JPY rate might rise from 136.18 to 136.19.

Swap rates for Forex, Commodities and Cryptos are charged in points per lot with the following formula:
Rollover Fee (Quote Currency) per day = Number of Lots * Contract Size * Long or Short Points (for the given day) * Point Size

- 1 lot Short on GBPUSD with account currency in USD

1 * 100,000 * 0.32 * 0.00001 = $0.32

- 1 lot long on XAGUSD with account currency in USD

1*5000*-0.22*0.01=-$11

 
- 1 lot LONG on USOIL with account Currency in USD

1*1000*-4*0.001=$-4.00

 
- 1 lot long on BTCUSD with account currency in USD

1*1*-1150.25 * 0.01 = $-11.50

Note: The swaps are applied at 00:00 GMT+2 (server time) when a position is rolled over. Triple swap takes place on Wednesdays for FX and Metals.