Introduction to Trading


Currency exchange has always been and still remains important for conducting business and foreign trade. How it takes place and how the foreign exchange market actually works interests many people. And in order to exactly understand the essence and functions of the market, we should firstly reveal how it is formed and what it stands for.

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Forex operates enormous amounts of money and gives an utmost freedom of opening and closing trading positions at current market quotations. High liquidity is highly attractive side for every investor because it enables the possibility of entering and exiting the market with any volume.

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CFD or Contract for difference is an agreement between two parties, buyer and seller. The value of the contract is based on the underlying asset (for example, index, stock or commodity futures). Upon the contract expiration or when the parties make a decision to close the position, the seller pays the buyer the difference between the current value of the asset and its opening value, if the value of...

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Nowadays each individual has access to Foreign Exchange market due to margin trading which is referred to speculation on the market by credit or leverage, provided by the broker for a certain amount of capital (margin) that is required for maintaining trading positions.

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The difference between Bid and Ask prices is the spread, which is calculated in pips. Taking into consideration the size of the spread is an important factor during trading, because high spread results in a significant share of loss to the client during active trading.

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Foreign Exchange market is the largest decentralized market where the volume of daily transactions equals to billions of dollars. The minimum volume of the transaction in the interbank market is too high and is assuredly not accessible for private investors owning small means. Due to margin trading individual investors have possessed an oportunity to make online transactions with various currency...

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When rolling a position over to a new value date (to "the next day"), an operation called Swap is performed – the company charges or pays a certain amount depending on the interest rate differential between the two currencies involved in the transaction, on its direction and volume.

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Pip (percentage in point) is the smallest possible change of the quotation. Pip is equal to 0.0001 or 0.00001 for the most currency pairs that are quoted to the fourth or fifth decimal point (for JPY pairs - to the second or third decimal point). Moreover, for the purpose of comparative analysis it is widely accepted among the companies’ website to indicate the pip to the fourth decimal point (for...

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