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Quite simply, forex trading is the act of buying and selling currencies. This is the world’s largest financial market with a daily turnover of $5 trillion and it involves many people – and many currencies. Because you are always buying one currency using another currency, you trade ‘currency pairs’.
Want a visual explanation?
Take a look at this short video:
Exchange rates change all the time, and forex traders attempt to take advantage of these changes. Here’s a quick example:
Let’s say you travel abroad and you go to an exchange and use $500 to buy euros. After a week, you come back (without spending a single euro) and exchange your euros back to dollars – but you receive $505, because during the week, the exchange rate changed. This is a profit of 5 dollars, which you made by trading currencies.
Of course, nowadays you don’t need to leave the house to invest in the price of currencies – and you don’t even need to actually buy the currencies. Thanks to online forex trading anyone can invest in the price of different currencies from home - or even from their smartphone - and take advantage of changes in price.
There are many types of currencies that you can invest in with iFOREX – in fact, there are over 80 pairs to choose from. Let’s take a close look at some of your options.
Pip stands for Percentage In Point. For most currency pairs, it corresponds to the movement of one unit of the fourth decimal digit in a rate, but there are exceptions like the Japanese Yen pairs, where a pip corresponds to the movement of one unit of the second decimal digit in a rate.
Confused? Here’s a quick example:
If the EUR/USD moves from 1.1050 to 1.1051,
this .0001 rise in value is one Pip.
The forex market operates 24 hours a day and is commonly separated into four sessions: The Sydney session, the Tokyo session, the London session, and the New York session.
In the past, only large investors participated in currency trading, but nowadays anyone can trade currencies in the form of CFDs from home – and you don’t need to be rich to invest. Thanks to a unique tool called ‘leverage’ you can open large deals with a relatively small investment. For example, with a €100 investment, you can open a deal of up to €40,000, using leverage of 400:1.
This means that for every euro you invest, we give you up to €400 in trading power. And remember: Because of iFOREX's Negative Balance Protection you can never lose more than your initial investment – your account will never go into minus, regardless of the leverage you choose.
Are you ready to open your first currency deal? Great!
You can do so in three simple steps.
Close your deal and collect the profit
Let’s say the rate of the EUR/USD rose - meaning that the price of the euro increased by 0.01 - and you decide to close your deal.
Join iFOREX to get an education package and start taking advantage of market opportunities.