Forex EN

The foreign exchange market, forex or abbreviated as Forex is the Foreign Currency Market, which is a kind of trade or transaction that trades any country's currency against another country's currency (the currency pair/pair) involving the major currency markets in world exchanges for 24 hours on an ongoing basis. It is the meeting place of supply and demand of foreign currency.

When you make a transaction, you will always trade a combination of two currencies, where one currency in the pair will be bought (Long/Bought) and another will be sold (Short/Sold). This means that investors are speculated that the value of one currency will be stronger against another in the pair. Example: EURUSD, if you buy the Euro then at the same time you sell the USD. In this case you are speculating that the Euro will be stronger than the USD.

In foreign exchange, people can buy or sell any traded currencies for the purpose to gain a profit or benefit from position in transaction. There is a term of Lot and Pip in foreign exchange. The value of 1 lot is USD100,000 and 1 pip value of 1 lot EURUSD is USD 0.0001.

The traded currencies are the major currency pairs: EUR/USD, GBP/USD, AUD/USD, USD/CHF and USD/JPY.

Risk in Forex Trading

We need a trading plan to manage level of risk. Transaction in forex market is not only about profit or loss, but to find the right point or timing to entry or exit the market. Therefore, a trading plan should be made on technical and fundamental basis. The movement and fluctuation of price can be predicted by these both of analysis, so the risk of wrong position and loss can be minimized and the target of profit/loss to be achieved can be predicted before execution of transaction. The usable strategy are Stop Loss, Trailing Stop Loss, Cut and Switch and Averaging. With trailing stop facility, investor is able to move the stop loss level for the purpose of protecting already gained profit.