What is forex? Check Out the Review
What is forex? Forex stands for foreign exchange. We will present a complete review of forex to complement our previous notes which have also discussed forex segmentation in particular in more detail and are very in-depth in order to add to your insight about this.
Forex or Foreign Exchange is a currency exchange or foreign currency trading whose activities are usually called Forex Trading and in Forex Trading the currency pairs are traded such as EUR/USD, GBP/USD, USD/CHF etc.
So in Forex we can buy (long) or sell (short) the currency to make a profit.
Examples are as follows:
- If we make a buy transaction on EUR/USD it means we are buying EUR and at the same time we are selling USD.
- If we make a sell transaction on EUR/USD it means we sell EUR and at the same time we buy USD.
Example of Profit & Loss (Profit & Loss):
- If we buy EUR/USD at the price of 1.3900, then the price moves up to 1.3950 (close price), it means we get a profit of 1.3950-1.3900-spread =...pip.
PIP = Procentage In Point/a measure of currency movement.
Spread = the difference between the selling/bid price and the buy/ask price.
Spread for EUR/USD = 2 (MasterForex fix spread), so 1.3950-1.3900-2 = 48 pips.
- If we sell EUR/USD at the price of 1.3900, then the price moves down to 1.3850 (close price), it means we get a profit of 1.3900-1.850-2 = 48 pips.
- Losses if the opposite of the profit calculation above.
Types of Currency Pairs are divided into three groups, namely:
1. Direct, is the currency that the USD is behind, for example (EUR/USD, GBP/USD).
2. Indirect, is the currency that the USD is in front of, for example (USD/JPY, USD/CAD).
3. Cross Rate, is a currency that is not compared to USD, for example (EUR/GBP, EUR/CHF).
The currency in front is called the Base Currency and the one in the back is called the Counter Currency ( EUR/USD = EUR base currency, USD counter currency).
The Forex market moves for 24 hours, starting Monday morning (4.00 WIB) to Saturday morning (3.00 WIB) / GMT+7, because the forex market is divided into 3 zones, namely the Asia zone, the European zone and the America zone.
The advantage of forex is that we can benefit from 2 directions, when the price goes up or when the price goes down or it can be said that the price goes down-sell-profit, the price goes up-buy-profit. Forex also has high liquidity in other words in a relatively short time we can get big profits and vice versa can be big losses.
To be able to start Forex Trading you will need:
- A set of computers/laptops (minimum pentium 4).
- Stable internet connection.
- Of course Capital, at least $100-$200 (in rupiah according to the exchange rate).
- Register with a Broker.
- Software (Metatrader).
To register and get Metatrader, you can visit the broker below.