Inside Trade | The Bigger Picture

Often times we see Forex as an exciting but risky investment and that the cash flowing in it seems infinite. But didn't you ever wonder how it happens? That's why I will give you an overview of what's really going on in case you're curiosity suddenly spiked towards an explanation.


Forex is the abbreviation of Foreign exchange wherein a profit or loss maybe acquired through buying or selling of a particular currency. It is a bank-to-bank market that allows a currency to be traded with an another.


Its participants are the banks (central and commercial), pension funds, insurance companies, brokers, dealers, and private investors. It doesn't require a huge capital for the reason that brokers allow an investor to loan in order to conduct a deal that his/her capital isn't really capable of. It is called leverage.


There are 2 parts of the trade. Opening and Closing position/s.  


Open positions is the starting point wherein a trader maybe either willing to buy (Bid) or sell (Ask) a currency. The difference in points, called Pips, between this two is called the Spread. Close position is the point wherein a trader agrees to the current price of the transaction.


There are already numerous strategy circulating the web but here are the most common and trusted strategies:


Day Trading – opening a position that may last for a few minutes up to several hours but would be closed within the same trading day.


News Trading – Often times produce a stable income through the prediction of the market through analysis of news.


Midterm trading – the type that holds an open a position for medium term. The opened position may take from a couple of days up to a couple of months depending on the decision of the trader.


Technical Analysis – this kind of trading uses charts and indicators for analysis of the market movement to gain a profit.


Carry trade - gain acquisition from difference between the interest rates of currency pairs.


Since the advance in our technology now allows Forex trading to be done online. It connected the markets wherein it is traded thus making it available for 24 hours a day and 5 times a week.