JustMarkets, a globally recognized broker with an excellent reputation, has been a reliable and transparent service provider in the financial sector since 2012.
The company provides multi-asset trading services on financial markets, including one of the most popular — Forex. But what makes Forex trading so popular?
What currency pairs and other assets can be traded on Forex? Let’s try together to find the answer to such questions as how major pairs differ from exotic ones, what leverage is, and why risk management is important in Forex trading.
Understanding the essence of Forex trading can help you gather all the necessary knowledge and be ready to start your own trading journey.
What is Forex Trading
Over the past few years, Forex trading has changed significantly, and new tools have appeared, but trading currency pairs remains the most popular among traders.
Each currency pair has a unique three-letter ISO code, based on which currency pairs are divided into several main types:
- Major currency pairs, such as EUR/USD, USD/JPY and USD/CHF, are pegged to the US dollar and are most popular in Vietnam due to high liquidity volumes.
- Cross pairs, such as EUR/GBP and EUR/JPY, are less popular due to their lower liquidity, which is due to the fact that they are not pegged to the US dollar.
- Exotic pairs, such as EUR/TRY, USD/MXN, USD/ZAR, and USD/SEK, are much less popular due to their high volatility and lower liquidity which means trading difficulties and real-time analysis.
The exchange rate shows the value of the base currency (the former) against the quoted currency (the latter). Forex quotes have two prices:
- Bid– how much of the quoted currency is needed to sell one unit of the base currency.
- Ask– how much is needed to buy one unit of the base currency.
The difference between these prices is called the spread and is usually measured in pips or points. These elements are key when forming your trading strategy and objectives.
Risk Management
Forex trading can bring great financial success, but it also comes with great risks of losing your funds. To manage risks, there are many various instruments including stop-loss orders to limit losses.
Setting a stop-loss order depends on your trading strategy and trading style in general.
Take-profit orders are also part of the risk management system and allow you to lock in profits while the price is moving in the direction you want.
What Is Leverage
Without leverage, individual traders could trade much smaller volumes, and only institutions and millionaires would be left trading in the Forex market.
But anyway, to start trading, you must have a certain amount of money on your balance — margin. This amount can vary and depends on the trading instrument, position size, and leverage.
Trading instruments include currency pairs, spot metals, oil, and indices, each requiring a different margin amount.
Volume is the amount you buy or sell, measured in lots. For the MetaTrader platform, one standard lot equals 100,000 units of the base currency.
Leverage is a virtual loan provided by JustMarkets that allows you to control large positions with less capital.
For example, without leverage (1:1), you would need a deposit of $100,000 to trade 1 lot of EUR/USD on MetaTrader platforms, while with 1:200 leverage, you would only need $500.
JustMarkets offers flexible leverage that can be up to 1:3000, which means you will only need 30 USD to open 1 lot of EUR/USD.
How to Start Forex Trading
To start trading forex, you need to open an account with JustMarkets and download JustMarkets mobile trading app or use the MT4 or MT5 web terminal.
Don’t forget to test and develop your trading strategies and skills with a demo account. But don’t stay on it for too long, as trading with real funds differs greatly from virtual trading.
After creating a trading system, choose your account type and leverage size, verify your account, deposit, and start trading with more than 260 different trading instruments with low spreads and constant support from your broker. – Aug 27, 2024
JustMarkets is a globally recognised broker which provides multi-asset trading services on financial markets.
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.
Main image: justmarkets
