Foreign Exchange

The foreign exchange market is the largest and most liquid market in the world with the average daily trading volume exceeding $ 5 trillion

What is Forex?

Foreign exchange, also known as Forex or FX, is the largest and most liquid market in the world. It is also a decentralized global market where banks, financial institutions, investors, and individuals trade currencies with each other all the time, with the average daily trading volume exceeding $5 trillion. Unlike most financial markets, the foreign exchange market has no physical or central location and operates 24 hours a day, five days a week.

Learn about the exchange rate before trading foreign exchange

The exchange rate is the conversion rate of one currency into another and also the price of one currency in terms of another. As the currencies in different countries have different names and values, the rate for the conversion (the exchange rate) of one currency into another must be determined. For example, on December 31, 2015, one euro was worth about $1.05. By November 7, 2016, one euro was worth about $1.11. The euro increased in value by about 5.7% relative to the U.S. dollar during this period. The exchange rates of some currencies are linked, such as HKD to USD, which lowers the investment value of such currencies.

XAUUSD chart on TradingView

Forex trading refers to buying a currency while selling another (by traders on the forex market). Imagine a situation where the U.S. dollar is expected to weaken in value relative to the euro. In this case, a forex trader would theoretically sell dollars and buy euros. If the euro strengthens to a certain extent, the trader can sell euros and buy back more dollars, making a profit. This is similar to stock trading. Stock traders will buy a stock if they think its price will rise in the future and sell it after the price rises. But the big difference with forex is that traders can trade up or down just as easily. In addition to buying, the traders can also sell.

The forex market is influenced by many different factors, such as political and economic stability, monetary policy, forex intervention, and natural disasters (including earthquakes, tsunamis, etc.). Due to these factors, forex trading becomes very interesting and attractive. A highly liquid market allows rapid changes in prices, and a currency’s value fluctuates as its supply and demand fluctuate.

•   The increased supply or decreased demand for a currency can cause the value of that currency to fall.

•   The decreased supply or increased demand for a currency can cause the value of that currency to rise.

The forex market is open 24/5, without a break

Forex traders can trade in any corner of the world, 24 hours a day, 5 days a week.

Double opportunities from two-way trading (up and down)

For forex trading, there is no difference between the bull and bear markets. Forex trading offers traders opportunities in both bullish and bearish markets. In addition to "buy low, sell high", you can sell one currency when you think its exchange rate will fall and buy it back at a low rate. As long as you make the right decision, you can make money.

Low trading cost

Most forex dealers do not charge commission but make their money through the bid-ask spread (the difference between the bid and ask prices). The spread offered by TREX trade is lower than most of those offered by its rivals. Click here to see details.

Leverage up to 1:500

Leverage enables traders to trade larger positions than would otherwise be possible based on their actual account balance, improving fund utilization. The leverages available for different products are different. The highest leverage for forex trading on margin is up to 1:500. That is, a trader can trade positions worth 500,000 dollars with only 1,000 dollars in their account. It should be noted that risk management is very important in forex trading. High leverage can increase your profits, but it can also bring significant losses.

Transparent, impartial, and unmanipulated transactions

Forex traders include governments, banks, traders, and individual investors all over the world, and the average daily trading volume of the forex market exceeds $5 trillion. No country or individual can manipulate such a large trading volume at will. In addition, the trends and the exchange rate of the forex market may change with events occurring from time to time. There is no room for backstage operations in the forex market.

Initial margin

Initial Margin refers to the amount of money required to be paid by a trader when placing an order

Day trade margin and weekend margin

Day Trade Margin refers to the margin amount the customer must have during the trading hours. If they do not, they will be required to offset the position.

Weekend Margin refers to the margin amount the customer must have to hold the position overnight. If they do not, they will be required to offset the position.

Spread

A spread refers to the difference between the bid and ask prices. For traders, the smaller the spread, the lower the cost of trading.

In the long run, the spread can greatly affect the general profits or losses of day traders but have little impact on those of mid- and long-term traders.

There are two prices for forex trading: The buy price is called "BID", and the sell price is called "ASK". A spread refers to the difference between the bid and ask prices.

The calculation mode is provided as follows:

Gross profit or loss = (ASK-Bid) x contract unit x traded lots + overnight interest (if any) - commission (if any).

Example 1:

If you trade through TREX trade Platform: buy 0.5 lot of EUR/USD
(1 lot = € 100,000), the Bid is 1.1050, and you sell your positions at the Ask of 1.1090 on the same day.

Then, the gross profit or loss:

Gross profit or loss = (ASK-Bid) × contract unit × traded lots ± overnight interest - commission
= (1.1090 - 1.1050) x 100,000 x 0.5 ± 0 - 0
= $ 200

Example 2:

If you trade through TREX trade Platform: sell 1 lot of EUR/USD
(1 lot = € 100,000), the ASK is 1.1100, and you buy the positions at the Bid of 1.1030 on the same day.

Then, the gross profit or loss:

Gross profit or loss = (ASK-Bid) × contract unit × traded lots ± overnight interest - commission
= (1.1100 – 1.1030) x 100,000 x 1 ± 0 - 0
= $ 700

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