What is Forex?
Forex, or Foreign Exchange, is the simultaneous exchange of one
country's currency for that of another. FX provides foreign exchange
for the purpose of investor speculation. The investor wishes to
purchase or sell one currency for another with the hope of making
a profit when the value of the currencies changes in favor of the
investor, whether from market news or events that take place in
the world. This market of exchange has more daily volume, both buyers
and sellers, than any other in the world. Taking place in the major
financial institutions across the globe, the forex market is open
24-hours a day.
Buying / Selling
Placing a trade in the forex market is simple: the mechanics of
a trade are virtually identical to those found in other markets,
so the transition for many traders is often seamless. Below is a
step-by-step guide of what happens when a trade is placed.
In this market you may buy or sell currencies. The objective is
to earn a profit from your position. If you have bought a currency,
for example, and the price appreciates in value, then you will earn
a profit by closing your position. When you close your position,
sell the currency back in order to lock in the profit, you are in
actuality buying the counter currency in the pair. By trading currency
pairs, one currency valued against another, a rate of worth has
been established. After all, a country's currency has value only
relative to the currency of another country.
Just like in all markets, there are two prices for every currency
pair. The difference between these two prices is the spread, or
the cost of the trade. In this example, the spread is three pips.
Leverage
Leverage is the process in which a trader can take a market position
much larger than the value of the trader's account. TWS enables
you to take positions up to 100 times the value of your account.
However, we do not recommend using leverage of more than 10 times
your account value. Using leverage exaggerates both gains and losses.
Even when market conditions are relatively calm, using leverage
can generate large gains or losses. In the case where a trader surpasses
the maximum leverage allowed (which can happen when account equity
shrinks as a result of trading losses), TWS will close all open
positions in the account.
Rollover
For positions open at 5pm EST there is a daily rollover (interest
payment) you either pay or earn on an open position depending on
your established margin level and position in the market. If you
do not want to earn or pay interest on your positions, simply make
sure they are closed at 5pm EST, the established end of the market
day.
Trust in Trade Wall Street Financial.
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