Fx trading definition. Forex trading has a particular significance in relation to IG's platform. Here, we define forex trading in general investing and explain what it means to you when trading with IG. Forex trading is the act of taking part in the forex market in order to speculate and attempt to make a profit. It can also be known as FX trading, foreign.

Fx trading definition

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Fx trading definition. Prices are quoted two-way as Bid/Ask. In FX trading, the Bid represents the price at which a trader can sell the base currency, shown to the left in a currency pair. For example, in the quote USD/CHF /32, the base currency is USD, and the Bid price is , meaning you can sell one US Dollar for Swiss francs.

Fx trading definition


City Index uses cookies. By using this website you agree to our Cookie Policy. FX trading allows you to speculate on price movements in the global currency market. FX trading allows you to speculate on the changes in currency strengths over time, trading currencies and buying or selling one against the other. Forex traders seek to profit from fluctuations in the exchange rates between currencies, speculating on whether one currency's value, like the pound sterling, will go up or down in relation to another, such as the US dollar.

This high market liquidity means that prices can change rapidly in response to news and short-term events, creating multiple trading opportunities for retail FX traders. Forex is always quoted in pairs, in terms of one currency versus another. The first currency, also known as the base is the one that you think will go up or down against the second currency, which is known as the quote. Forex price movements are triggered by currencies either appreciating in value strengthening or depreciating in value weakening.

The Euro is the base currency and the US Dollar is the quote. If the number increases , this means that the Euro is getting stronger compared to the US Dollar. If the number decreases , this means that the US Dollar is getting stronger compared to the Euro. When trading currencies, you would buy a currency pair if you believed that the base currency will strengthen against the counter currency, or the quote currency will weaken against the base currency. So, if we think that the Euro will strengthen against the US Dollar then we would place a buy trade or go long.

It is important to remember that should the price of the euro weaken against the US Dollar, we would make a loss for every pip it falls. Alternatively, you would sell a currency pair if you believed that the base currency will weaken in value against the counter currency. If we think the Euro will decrease in value against the US Dollar we would place a sell trade and for every pip the Euro falls against the US Dollar you will make a profit.

Should the value of the euro rise against the dollar then you will make a loss for each pip it rises. Also known as leveraged trading, this means you can put up a small amount of money to control a much larger amount.

This means you can leverage your money further but it also means that losses will be magnified as well, so you should manage your risk accordingly — please ensure that you fully understand the risks of leveraged trading. Commonly traded currency pairs are traditionally divided into three groups related to popularity and liquidity: At City Index, you can trade over 65 currency pairs including majors, minors and exotics.

The spreads for these are usually tighter compared to the less traded minor currency pairs. These are not traded as heavily as the major currencies, and so tend to fluctuate more often. Spreads for minor currency pairs also tend to be wider due to the medium sized liquidity in the market, as compared to major currency pairs. These are currency pairs that are only very rarely traded. Due to the low volumes of trade, exotic currency pairs are illiquid and tend to be expensive to trade with wider spreads.

Many traders view exotic currency pairs as having higher risk profiles compared to commonly traded currency pairs. Forex trading is ideal for investors who want the opportunity to trade on a market that is open 24 hours a day, while at the same time minimizing trading costs and potentially profitting from markets that are rising or falling. However, it contains significant risks to your money and is not suitable for everyone.

We strongly suggest trading on a demo account before you try it with your own money. Looking for short term opportunities. FX prices are also influenced by economic and political conditions, such as interest rates, inflation, and political instability, such conditions usually have only a short-term impact, so FX trades are typically held open for a few days or weeks, rather than over the longer term. Who want to make their own decisions on what to invest in. City Index provides an execution only service.

We do not advise you on what to trade on, and do not trade on your behalf. Looking to diversify their portfolio. City Index offers access to FX markets which are otherwise difficult or costly for the retail investor to access. Be as active or passive as they want. You can trade as little or as often as you want. All trading involves risk and losses can exceed deposits. Create Account Demo Account. What is Forex trading? Next chapter How to trade forex. Test drive a trading account Trade Forex risk-free with a demo account.


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