Online trading on Forex market

Transacting in the FX market differs a bit when compared with equity or commodity markets. Here, instead of just buying one asset, you are buying one currency while selling the other. This is sometimes referred to as an advantage against other markets — in FX you can trade in both rising and falling markets. For example:

• Scenario:

  Trader believes that the British Pound will rise against the US Dollar in the short term. As a result, they will want to buy the British Pound or GBP. Subsequently, while buying (going long) the British pound, the trader will sell the US Dollar.

• Execution:

  Trader Buys 100K GBP/USD at an exchange rate of $1.5185.

• Trade Exit:

  After the GBP rises against the US Dollar, the Trader will Sell 100K GBPUSD in order to exit or close the trade. In this instance, they will close at $1.5285 (100 pips from the buy order).

• Result:

  The trader has now profited 100 pips or $1,000.00 from their buy trade in the GBPUSD.

• How Prices Are Quoted

  Similar to other markets, there are two sets of prices in every currency pair. The two prices are commonly known as the BID and ASK prices (or BUY and SELL prices). The BID prices is usually located on the left of the price quote while the ASK is placed on the right side. The difference between these two prices is the cost of the trade. Additionally, most currencies are quoted to four decimal places, with the only exception arising in Japanese Yen based currency pairs. The lowest decimal place or unit is referred to as a pip.