What is Trading Forex? - ForeXposed

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Friday, September 1, 2017

What is Trading Forex?



After reading or find out a little about forex, you probably know how big potential profits in the forex trading market. Hmm ... quite large in your mind. Large enough to meet all of your dreams and it was worth it for the intense.

Well, there's nothing wrong with all that knowledge. So too with your wonderful dreams. Everyone has the right to have the dream to live well established and become financially independent.

But it is just the most adorable thing in the world of forex. An ideal final destination. And maybe if asked further whether forex trading it, maybe you'll be confusion.

What forex is it equal to the money changer?
Or a trade like stocks?
From where can I get profit?
What is it legal?
Can a loss?
Or what?

Wait ... I know you have many questions. All these questions will be answered on this website.

Well, then let's start our first introductory course with forex trading.
To facilitate your introduction with forex, forex trading analogies I'd with stock or money changer. This is because most know what that money changer or stock trading (if you don't know, go to a money changer and ask the clerk there).

If anyone asks me what is forex trading then the answer can be very varied. But I liked this simple definition: forex trading is an investment instrument in the form of foreign exchange trading pairs. Forex has some other name like Fx, margin trading, or even Trade Forex. It was all more or less refer to forex trading.

The advantage in investing forex (forex is an abbreviation of Foreign Exchange) was obtained from the difference between the buying price and the selling price of a currency that we are operating with.

Simple example:

In the past month, Amir buys as much U.S. Dollar $1000 with Exchange rate Rp. 8500,-then this month the exchange rate USD strengthened to Rp 9500,-per Dollar. Then, when Amir sell his dollar this month he obtained a profit of (9500 – 8500) x 1000 = IDR 1 million,-easy isn't it?

If so, the exact same for forex with exchanged money at the money changer? Yes, indeed similar. Much like it's not the same. So there is a difference. In between, the main method is done with a form of margin trading, and there is no delivery of goods physically.

The couple traded in Forex trading-currency pairs are commonly referred to as pairs. For example, the USD/JPY pair which means that the exchange rate between the US Dollar and Yen Japan. There are several terms or abbreviations that will we find in the world of forex. We have to figure it out but don't worry, I've prepared a dictionary term in the other page.

Among the investment instruments on the trading floor, forex trading is the instrument that has most great capitals. A Large volume of trading around U.S. $2 trillion. It was about 46 times greater than any other commodity futures exchanges market (such as rubber, coffee, gold, and others). Or thousands of times larger than the total transactions at the Jakarta Stock Exchange!! With the capitalization of the forex trading market is known as the largest and most liquid in the world.

Only 5% of the Fund which is a Fund of the Government which is routine. The other 95% belong to many free investors. The biggest markets completely and deeply pluralist. Another plus is the forex trading is an investment instrument that is active 24 hours a day and 5 days a week. Starting from the European markets, the Americas, Asia, and Australia. So unlike the Jakarta Stock Exchange which can only Transact in daylight, on the forex trading (especially on online forex trading), we can make transactions anytime and anywhere.

Not all currencies can be traded here. Only a few developed countries currencies commonly used i.e. USD (US Dollar), JPY (Yen Japan), GBP (United Kingdom Pounds), EUR (Euro), CHF (Switzerland Francs), and the AUD (Australian Dollar). So when we invest in the forex trading market, then we will not find the pairs in the form of IDR (Indonesian Rupiah) with USD. That there are currency pairs that I mentioned earlier of EUR/USD, USD/JPY, CHF/USD, and so on. Remember our initial definition, forex trading is trading foreign currencies with other foreign currencies.

This is one of the differences between a money changer in General. If you go to a money changer and swap your Rupiah with Dollars, then it means that you make a transaction with a partner IDR/USD aka Indonesian Rupiah with U.S. Dollars.

This never happened in forex trading. Traditionally, the currency traded currencies are just fundamentally has advanced with a large import export volume as well as stable.

The next trait in forex trading never traded physically. Yup, never. Differently, if you had to go to a money changer and swap your Dollars, then you are required to carry it in your wallet for the physical.

Well, on the forex, and selling is done physically. Listed are merely evidence of the transaction, as well as when you make a transaction. All forex transactions are written in the form of a letter. Then after the phone usage expands, evidence of the transaction reduced just being short writings commonly called quotes. From this was born the term Dealing Quotes (DQ).

Forex trading is now no longer done by phone. Now is done by online. Then all the ways of transactions and evidence of any transactions are conducted online. You only need to fill in the User ID and Password provided by the platform provider (in this case, called the broker) then, click ... and there all the details of your transaction.

This is a very facilitate everybody in forex transactions because as such anyone can conduct transactions, and more so, such transactions are no longer limited by place and time. Because it is handled by the system, and not by telephone that in fact should be held by a human (dealer), then investors can make investments in forex anytime he wants, 24 hours a day, with ease.

In fact, I know several housewives who do forex trading through his home. At the internet on a computer or laptop, they analyze price movements.

One of the most prominent in the world of forex trading model is done with margin trading system. Margin trading is a trading system which uses to guarantees in trade (margin = guarantee)

This contrasts with the trading system using the method of the usual spot we do every day. The intent here is Spot trading system with one single Exchange rate.

Getting confused? OK then let's see a real picture in the world of foreign currency exchanges every day. Again I compare foreign exchange trading through the money changer with forex trading. Let me give a simple overview. I take the example of the currency pair of GBP/USD. This means that the United Kingdom Poundsterling currency compared with the U.S. Dollar.

At the time this article was created, the exchange rate of the DOLLAR is of 1.9650. It means 1 Pound United Kingdom is equal to USD $1.9650. Typically this currency movement, more or less, experienced a movement of 100 points per day. So, the next day, say the exchange rate GBP/USD being 1.9750. Do you know how the magnitude of the benefits when You trade with and without margin trading?

Now let's discuss one by one. The first one without the use of margin trading system or trading Spot.

Because we know the prices will move up, then to gain an advantage is by doing the action. Buy cheap and sell expensive.


Spot Trading Example

Such as, you buy as many as 100 pounds for a profit. Then the magnitude of profit is (1.9750 – 1.9650) x 100 = 100 x 0.01 pounds = 1 pound sterling. Ehmm ... small huh? Yes, it is small, because the everyday motion of the currency is not big. If you want a big profit, then do not just trading with 100 pounds. How about 10.000 Pounds? Well, it means that fortunately, we get to reach 100 Pounds with the same movements as in the previous example.

Well, this new feeling. 100 Pounds, or if it was made Rupiah to about Rp 1.5 million (1 Pound = Rp 15,000).

Profit gained is great indeed, Rp 1.5 million. But any large capital, 10,000 pounds! Capital needed more or less around Rp 150 Million to benefit Rp 1.5 million. One day just a 1% profit! Better, I use the money to buy a house or at least a car rather than foreign exchange trading at this way!

HA ... HA.. Yes, that's the model Commerce Spot. This trading system is Exchange One for One. That is, to obtain as much as 10,000 Pounds You are obliged to dispense the money just as much as well. Not effective if viewed from the side of the capital and profit. That's why, you rarely find them who invest foreign exchange spot trading, with the exception of very large funds are involved.

In addition indeed because the percentage of profit calculations do not correspond to the capital, viewed from the side of any capital in need of funds, not a bit.


Calculation Of Margin Trading Examples.

Well, margin trading eliminates the above problem by using a guarantee/margin. The same case and indeed the way out more or less the same. It takes 10,000 pounds if you want an advantage in sufficient amounts.

But get there alone, with enough margin trading, you don't have to pay 10,000 Pounds to buy 10,000 pounds. That is, you just simply removing the collateral only. How the magnitude? You need a guarantee of 10% to get the whole part. That is to say, if you want to buy as many as 10,000 pounds, you simply issue a 1000 Pound only. Yes, at least it's been reduced considerably compared to the original. But still great. 1000 Pounds means Rp 15 million.

Finally, large this guarantee come back was reduced to 5%. And finally, after a request here and there, now most forex trading brokers providing warranties that are small enough to be able to perform a purchase or sale. Just 1% or sometimes referred to 1:100 (this is called leverage ratio)!

It means that when you want to buy as many as 10,000 Pounds, you can simply eject as much as 100 Pounds, or approximately Rp 1.5 million. Lot cheaper right?

Any profit the magnitude remains 100 Pounds or Rp 1.5 million. Wow, with a capital of Rp 1.5 Million we can benefit Rp 1.5 million within a day. That means profits reaching 100% in 1 day! Really incredible.

Well, that was an excess of margin trading. Something impossible done by conventional trade. But wait ... What brokers do not loss handed to us 10,000 Pounds while we just simply removing the Rp 1.5 million? Not at all. Remember the discussion above, forex trading is not done physically. This means that Brokers do not have to hand over the money as much as 10,000 Pounds to the buyer because all transactions are not done physically. So, margin trading solved the unbalance of profit loss percentage.

OK. Margin trading becoming gods helper in our sessions this time around. Later we will learn together that turns out margin trading is actually a double-edged sword blade the same sharp. Logically if margin trading can enlarge your profits, then the margin trading can also enlarge your losses!