Currency Trade (FOREX)
What is Forex?
The Forex trade is simultaneous purchase of one currency and sale of another. The currency market (Forex or FX) is the biggest financial market in the world with its daily turnover exceeding $1.9 trillion. Prevailing part of the transactions is carried out in any of the main currencies: US dollars, euros, British pounds, Japanese Yens, Swiss frank, Canadian dollars and Australian dollars.
As distinct from the other financial markets, the currency market is not exchange centralized. The Forex market functions 24 hours a day, through a network of computer terminals connecting banks, corporations, brokers and individual investors. The trade starts each day in New Zealand, followed by Sidney, through Tokyo, London and New York, to the seacoast of California.
The Forex markets and the prices of the currencies are affected mainly by the international commercial and investment flows, as well as by the factors influencing the securities markets: the economic and political conditions, especially the main interest rates, the inflation and the political instability. These factors usually exercise a short term influence, which makes the currency market attractive, offering diversification protection against unfavorable movements on the exchanges.
Similar to other financial tools, the currency quotations include Bid price and Ask price:
- Bid: The price, at which the dealer Buys and the investors Sell.
- Ask: The price, at which the dealer Sells and the investors Buy.
The difference in the Bid/Ask price is called a Spread. The spread is the price, which the investor is charged for entering in a deal. Varchev Finance offers the tightest spreads in the Bid/Ask price, thus lowering the costs for our clients. For more info regarding the conditions on trade of Varchev Finance, click here.
The currencies are quoted up to four digits after the decimal comma, for example USD/CHF 1.3000/1.3003, the last digit is called “pip”. For more currencies one pip is 0.0001 from the current rate. The pairs, where the Japanese Yen (JPY) is on second position and one pip is equal to 0.01 make exclusion.
The investors base their decisions regarding trade on technical or fundamental analysis. The technical analysis uses graphs, trend lines, support and resistance levels, mathematical models and other means. Investors using fundamental approach base their decisions on economic analysis. More information on technical and fundamental analysis you can find in Training section.