The purpose of trading forex is to change one currency for another with the expectation that the price will change, so he bought the currency should rise in value compared to that sold. Example
make money by buying Euros with Dollars
| Operation | EUR | USD |
| Buy 10.000 euros Forex Market EUR / USD at a price of 1.45 | | +10,000 -14.500 * |
| After two weeks, change back your Euros for dollars at a rate of 1.52. | -10.000 | +15.200 ** |
| He has won $ 700. | 0 | +700 |
* EUR $ 10,000 x 1.45 = U.S. $ 14.500
** EUR $ 10,000 x 1.52 = U.S. $ 15.200
How to Read a quote
Forex Currencies are always traded in pairs such as GBP / USD or USD / JPY. The reason is very simple, and because each time you buy one currency is selling another automatically, and vice versa.
The exchange rate is just the value of one currency against another. For example, the exchange rate of USD / GBP indicates how many dollars I can buy using Pounds Sterling. Or the rate JPY / CAD indicates the amount of Yen that I can buy with the Canadian Dollar.
A simple example: GBP / USD = 1.95
The first coin (before the "/") represents the base currency, in this case the British Pound (GBP) while the second currency quoted is called, in this case U.S. Dollars (USD). The example tells us that for every £ we want to buy we sell (pay) $ 1.95 (USD).
Long and Short
Before an operation we have to determine, namely whether we buy or sell. When buying a coin thinking this is going to rise in value is called a long operation (commonly said: "go long") and once, when you sell a currency because they think that it will fall short operation is said (go short).
Remember: Long = Buy = Sell Short
Differential buyer / seller
All Forex quotes include two types of pricing, buying and selling price (also called the offer price, demand, English BID and ASK). The bid price is always lower than the bid price.
The bid price is the price at which the broker or broker is willing to buy. That is the price you, as operator, has to sell.
And at the same time, the bid price is the price at which the broker or broker is willing to sell. That is the price you as a trader has to buy.
The figure below A list of foreign contributions.
EURUSD: Forex Euros with U.S. Dollars
Bid (Bid) or selling price: The price at which we will abide if we sell Euros
Ask (demand) or purchase price: The price at which we will abide by buying Euros
If we think the Euro will rise against the dollar, would have to buy Euros and our operation would be "Long" . The price you would buy Euros Ask price and sell the Euros would be the Bid. If we a short operation would be exactly the opposite.
Leverage (Leverage)
The margin trading on the foreign exchange market is quantified by "lots". We will discuss these in detail in our upcoming classes. For now, think of the "lot" as the minimum amount of money you have to buy to operate. When you go to the supermarket and want to buy an egg, you can not buy just a single egg batch bought eggs, usually 12. In currencies, and would be foolish to buy or sell $ 1 EUR, so it usually goes for $ 10,000 or $ 100,000 depending on the type of account you have.
Forex
companies, to allow a customer to transact with a "lot" use the leverage or leverage, that is, lend money to the customer so you can come to operate. Leverages are around 100 to 1, or 50 to 1 in general. If you have 200 EUR and has a 100 to 1 leverage can settle as € 20,000 - that is, 2 lots.
Example of a transaction with leverage
you think the Euro will rise with respect to the U.S. Dollar. So you want to earn money through Internet trading forex.
have 200 USD to operate, and obtained a leverage of 100 to 1. Giving capital to operate
$ 20,000
Purchase Price: 1.45
Price: 1.46 Euros
To purchase the minimum lot is 10,000, so you can purchase a single lot of Euros to the sale price: 1.46. $ 14,600
use
His operation was successful and the Euro rose to the following prices
Purchase Price: 1.48
Price: 1.49
sell Euros for using the purchase price of the broker to 1 , 48, and we get to sell the lot 14,800. They make a profit of USD (the finals against the 14,600 14,800 initials).
Now comes something very important is the calculation of profitability.
won 200 with an initial capital of 200 (the $ 19,800 was loaned by the broker). We obtained a 100% return
Leverage allows excellent returns but also at great risk.
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