How currency trading works, the theory and practice of trading

Exchange trading of currencies takes place on the foreign exchange market, which can be either external or internal.

The most famous trading platform is Forex, where most contracts for the sale and purchase of various currencies are concluded.

The process itself is quite complex and successful trading requires knowing and taking into account many different factors.

This article will discuss how trading works in practice and what the main components of currency trading are.

First of all, it is necessary to dwell on the basic concepts and principles.

Making a profit.

Currency trading is based on the idea of ​​profiting from exchange rate differences. The classic speculative trading scheme is buying at a low price and selling at a higher price, or opening a sell trade and closing it with a buy after the price drops.

Profit is generated by the difference between the purchase and sale price; for example, if you bought euros at $1.2500 and sold them some time later at $1.2600, your profit would be 100 pips.

When making money on short-term trades, the currency is first sold, and after the exchange rate drops, the position is closed by purchasing the same currency, but at a significantly lower price.

The value of one point directly depends on the volume of the transaction being carried out; approximately, when carrying out a transaction of 1 lot (100,000 units of the base currency), one point is equal to 10 dollars.

To increase profits on Forex, leverage is used. This means that if you have $1,000 and open a trade using only your own money, a profit of 100 pips will be equal to only $10.

In the same case, if you use a leverage of 1:100, your profit will also increase 100 times and amount to $1,000.

Read more about margin trading here - http://time-forex.com/terminy/margin-trading

Modern currency exchange trading in practice

Trading tools.

The instrument for trading on Forex is a currency pair, in the form of which the currency quote is recorded. The base currency comes first in the pair, the quoted currency comes second. The quote looks like this: EUR/USD Bid 1.2500 Ask 1.2600. The quote value shows how many dollars one can buy or sell one euro for.

The difference between the Ask (buy) and Bid (sell) prices is called the spread; this is the commission the broker charges for providing its services.

Intermediary in trade.

You can't enter the international forex market on your own; it requires a large sum of money and special accreditation, so all trading occurs through intermediaries – brokerage companies .

In order to trade, you first need to choose a broker. This process is quite complex and requires making an informed decision that takes into account many factors.

The main ones are the availability of the necessary licenses, residency requirements (some brokers do not work with citizens of Russia or the European Union), the size of the initial deposit, and the presence of prohibited strategies.

Equipment.

To trade currencies, you'll need a personal computer or laptop (or tablet). A mobile device (phone, iPhone, smartphone, etc.) can also be used, but it's best to start trading from a desktop computer.

Your device must have a stable internet connection, preferably a cable connection, to avoid connection interruptions.

Special software, a trader's terminal, is installed on the computer, and all operations are carried out using it.

Read about the best trading terminals here - http://time-forex.com/praktika/terminal-trejdera

Is it possible to make money by speculating in currencies?

It's certainly no wonder that currency trading has become a full-time occupation for tens of thousands of people; today, it's hard to surprise anyone with the profession of a trader, even in the post-Soviet space.

True professionals earn a stable and substantial income from currency trading; no other profession offers such a high income.

Top managers earn millions of dollars a year, and many of them become owners of their own investment companies.

You will find step-by-step instructions on how to start earning money through Forex trading with currencies and other assets in the section - http://time-forex.com/azbuka