How to merchandise forex
A forex trader has 1 objective in mind when trading which is:
To exchange one currency for another in guild to make turn a profit.
But if y’all are new to forex or financial trading of any kind, there is still a long style to become earlier you even buy your first contract. This is why we have come up with a basic, step-by-step tutorial to help you lot bridge that gap and make your beginning merchandise.
Larn to read currency pairs
Step i
Tin can’t brand heads or tails of currency pairs? Here is a simple way of looking at it:
Tips:
- The base currency is always equal to one unit
- The price of the currency pair indicates how much of the quote currency is required to buy one unit of base currency. This is more unremarkably known every bit the exchange charge per unit.
Instance:
If you see EUR/USD has a bid price of 1.05229, you will purchase 1.05229 USD for every i EUR that you sell.
Understand when to buy and sell
Stride ii
Yous desire to buy a certain currency pair if you call back the base currency will go up. The reverse holds truthful:
Y’all desire to sell that currency pair if you think the base currency will go downwardly.
You have probably seen the terms ‘going long’ and ‘going short’ existence used by a lot of forex brokers and traders. Let’s compare the differences betwixt the ii terms:
Long:
- Get long = buy
- Y’all are ownership the base of operations currency and selling the quote currency.
- You are expecting the base currency to ascension in value so y’all can sell it back for a turn a profit.
Short:
- Get short = sell
- You are selling the base of operations currency and buying the quote currency.
- Y’all are expecting the base of operations currency to fall in value and so you tin can buy it back at a lower price and make profit.
Instance:
After your analysis, you have come to the conclusion that the British economic system volition outperform its U.S. counterpart. Thus, yous decide to go long and purchase into the GBP/USD, expecting the GBP to ascent in value.
If you decided that the British economic system will underperform instead, so you will get short on the GBP/USD.
Buy your starting time currency pairs
Step 3
After you have decided which position you lot desire to take whether long or short you are well on your style to ownership your first currency pair.
Example:
GBP/USD currency pair and its bid-enquire price.
To go long, you volition click on ‘Buy’ to purchase one GBP for i.22781 USD. To get short, you volition click on ‘Sell’ to sell 1 GBP and receive 1.22771 USD in return.
How to merchandise CFDs
New to CFD trading? We explicate a few basics that all CFD traders need to know before they start trading.
When to buy and sell
When you are trading CFDs, you can choose to open a buy position (if y’all think that the price will rising) or a sell position (if you recollect that the cost will fall).
Purchase
In this instance, you predict that the price will rise. This is also known as ‘going long’.
Sell
In this case, you predict that the cost will fall. This is too known equally ‘going short’.
Let’s use the U.s. 100 index as an instance:
If yous determine to purchase or ‘go long’ on the U.s. 100 index, your profit will go along to increase as long every bit the price of the Us 100 index keeps rising. Notwithstanding, if the price falls, the losses you incur will also increase.
The opposite is true if yous decide to sell or ‘go curt’ on the United states of america 100 index. This means that your profit will continue to increment equally long equally the toll of the Usa 100 index keeps falling. However, if the toll rises, the losses you incur will also increase.
How to calculate your profits and losses
Permit’s say a U.s. 100 contract is worth ane USD per bespeak in the underlying asset. If you decide to ‘go long’ on the US 100, and the nugget price rises by 10 points, that represents a 10 USD turn a profit for you.
Nevertheless, if the asset price falls by ten points, that represents a ten USD loss for y’all.
How to shut a position
When yous decide to shut an open contract, you merely need to take the contrary position in gild to close the contract.
For case, if you buy a 100 USD contract and information technology’s not going every bit planned, yous simply need to sell it to cutting your losses at the current market cost.
How to merchandise cryptocurrencies
Trade Bitcoin, Ethereum, and Litecoin pairs without owning them. Our cryptocurrency pairs quote a cryptocurrency such as Bitcoin against a fiat currency, such as the US dollar.
Similar to forex trading, you must understand when to purchase (or “become long”) and when to sell (or “go short”). In forex trading, yous’ll buy a sure currency pair if y’all recall the value of the base currency volition rise. The opposite is also true: yous volition sell a certain currency pair if you recall the value of the base currency will fall.
The same concept applies to our cryptocurrency pairs.
Let’due south compare the differences between ownership and selling, using the BTC/USD as an example:
Buy
- Y’all’re ownership the BTC and selling the USD.
- You expect the BTC to ascension in value and so you can sell it dorsum for a profit.
- Buy = go long
Sell
- You’re selling the BTC and buying the USD.
- You expect the BTC to autumn in value so you lot can buy it dorsum at a lower price (and make a profit).
- Sell = become short
In a nutshell, when y’all go long on the BTC/USD with Binary.com, yous are not purchasing bitcoin straight. Instead, you’re taking a position that the BTC/USD will rise in value whereby yous volition make a turn a profit. If you go long on the BTC/USD and its value falls, then you volition make a loss.
Source: https://www.binary.com/en/metatrader/how-to-trade-mt5.html
