Some Reasons Why You Should Trade Forex and Two Important Forex Concepts You Must Know.
Adrian Pablo
Some of the great reasons why Forex trading is a great way of entering the capital markets is that is all commission-free and it has a low transaction cost. All the best forex brokers have these characteristics and even Mini FX traders (i.e., traders starting with accounts having a capital as low as $250), who are just starting in this field, can buy and sell currencies online always commission-free.
When trading the Forex markets you don't have to worry about fees you may have to pay to your broker; there are also none of the usual fees to which futures and equity traders are accustomed to pay always; no exchange or clearing fees, no NFA or SEC fees.
Over-the-counter currency trading involves a bid/ask spread and that's how the brokers make money. The good news is that the currency market is capable of offering you a round-the-clock liquidity and this way you will receive tight, competitive spreads both in intra-day and night trades.
Now, once you enter the world of forex trading you will need to learn about two very important concepts. These are; "Pips" and "Buying and Selling Short". Let's talk about "Pips" first. Currency pairs prices are considered always to go out to 4 significant digits. For example; if one currency pair is trading for 1.3451 then if the price increases to 1.3452, that would be a "one-pip" increase in the price of this particular currency pair. This is an increase of one hundredth of a percent of the value of the currency pair you are trading at the moment. And depending the type of account you are using, regular or mini, each pip will have a value of $10 or $1. So if you make 10 pips a day with a regular account you would have made $100 and with a mini-account $10.
The concept of "Buying" in Forex refers to the acquisition of a particular currency pair to open a trade and "Selling short" refers to the selling of a particular currency to open a trade, i.e, just the opposite. When you Buy, you are expecting the price of the currency pair to increase with time, i.e., you buy cheap to sell high; which is easy to understand. In the case of Selling short, it looks a bit more complicated. Here the way to make money is to initially sell a currency pair that you think will lose value in a given period of time and then, once it happened, you will buy it back at the new price but now you can sell it at the previous greater price the currency had when you opened the trade, so you earn the difference in prices. It may seem kind of tricky when you are starting, but once you are in front of your trading station it will look much simpler.
About the author:
Adrian Pablo is a Forex freelance writer with articles published in a number of places. Get a free report on Fibonacci Trading and learn more about the world of trading , visit:
=> http://www.1-forex.com
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