Have account, will trade foreign currency exchange

Having explained what pitfalls await for people looking to create new forex currency trading accounts, in this post we will discuss what exactly you should trade and why. Further, we will explain what spreads and pips are and why they are important if you’re planning on forex currency trading for a profit. Despite some forex trading related limbo like pips and spreads, forex currency trading is mostly a common sense business and relies little on specific knowledge you might have to gain through a degree.

A pip is one unit of the smallest figure in a currency pair and as currencies are normally quoted to four decimal places, i.e. 0.1234 therefore a 1 pip change would mean that the four would instead be a 5. Take the EUR/USD exchange rate in the current forex currency trading market for example, it currently stands at 1.3585 and a one pip increase in the EUR/USD rate would mean that the rate would change to 1.3586.

This change in the example above would mean that if you had the base currency (in this case the Euro) and this appreciation of 1 pip happened then you could trade your Euros for U.S. Dollars (the quoted currency in this case) and have 0.0001 more per Euro than you would have had before the increase.

Now there are two main ways to trade forex. The first and most common method of forex currency trading is simply to purchase and sell currencies, to go long on one currency and short on another. The other forex currency trading method is for more experienced traders and involves purchasing and selling derivatives such as options and futures.

To go long on a currency pair means that you are hoping that the price of the currency rises after you have purchased the currency pair in the forex currency trading market. Our earlier example for pips is a good example of this. If you had purchased Euros by selling U.S. Dollars then you would be going long on the EUR/USD pair by hoping that it would rise in the forex trading market. As the EUR/USD pair did rise by one pip, you would then stand to make a profit.

In the next we will discuss what type of orders are available to you as a holder of aforex currency trading account and what the uses of these orders are.