Forex Trading with Tredero

The most highly traded market in the world, Forex or FX trading, has a daily trade volume of over Four Trillion dollars. Forex is an OTC (Over The Counter) market, meaning there is no centralized exchange. The market comprises various participants, including brokers, banks, hedge funds and institutional investors.

Forex trading involves trading the exchange rate of a specific currency pair, hoping to profit from the rise or fall of this rate. A typical forex currency pair would look something like this:

EURUSD: 1.19000

That would make one Euro worth 1.19 United States Dollars.

In any forex currency pair, the first currency is known as the Base, and the second currency is known as the Quote. In our EURUSD example, the Base currency is the Euro, and the Quote currency is the United States Dollar.

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The Forex Market

The forex market is open twenty-four hours a day, Monday through Friday, with four major sessions throughout the day. These major sessions are in Sydney, Tokyo, London and New York. The major trading sessions are Asia, Europe, and North America, with the highest trading volumes occurring during the overlaps between these major sessions’ opening and closing hours.

Forex Market Hours

Asian Session: 11 p.m. to 8 a.m.

European Session: 7 a.m. to 4 p.m.

North America: Noon to 8 p.m.

All times are in GMT. The major market for the Asian session is Tokyo, the major market for the European session is London, and the major market for the North American session is New York.

The overlaps between these market hours are where volume and volatility are at their highest.

Forex Trades

Trades in forex currencies are opened with the expectation of profiting from the change in the rate between the two currencies. Trades can be Long (with the expectation of profiting from the rise in the rate) and Short (with the expectation of profiting from the fall in the rate).

Trading is done in what is known as Standard Lots, where a standard lot is equivalent to 100,000 units of the base currency. In our EURUSD example, a standard lot would be for 100,000 Euro and 119,000 United States Dollars.

Trades can also be opened in Mini Lots equivalent to 10,000 units of the base currency and Micro Lots equal to 1,000 units of the base currency.

Let’s take an example trade here to illustrate the process. Let’s assume we believe the EUR will rise against the USD. We open a Buy trade for one standard lot of EURUSD at 1.19000, giving us 100,000 EUR and owning the markets the equivalent in USD, in this case, 119,000 USD.

The price of the pair rises to 1.25000, at which point we close our position, effectively selling our 100,000 EUR back to the market for 125,000 USD and a profit of 6,000 USD on the trade!

Forex Leveraging

Forex trading is a leveraged product that can serve to multiply your profits on successful trades, but it can also magnify losses for any trades going against you. While leverage is a valuable tool for investors, always use caution in your leverage application and always stick to your risk management profile.

Practice your trading with the Tredero Demo Account

The Tredero demo account is the ideal way to perfect your trading in a risk-free environment!