ORIGIN AND CONCEPT OF FOREX -2

EPISODE -1

If you not even read out the first episode i just adding the url click and read it in continuous manner. Otherwise you won’t get to know what it’s happening in forex and global market.

https://vktradersblog.blogspot.com/2020/08/origin-concept-of-forex.html - Origin and concept of forex (1)

EPISODE- 2

Eagerly waiting for the next episode to move on. I think so many people have come acrossed the word trader or trading but still so many people doesn’t know what’s the different between the forex trading and a normal trading.

Some people were thinking that this is like an goods import/export one.

Until you starts to know about the topic you can’t step into anything.

Well, shall we move on to the topic.

Major currency:

• USD
• EUR
• JPY
• SWITZERLAND
• CANADA
• AUSTRALIA
• NEW ZEALAND

And in the world, there are 100 different currency are found but when we dealing with forex we are supposed to pair with eight currency.

HOW ARE CURRENCY PAIR DIFFERENTIATED:

• Major currency pair,
• Minor currency pair,
• Exotic currency pair.

MAJOR CURRENCY:

• EUR/USD -  Euro/US dollar
• USD/JPY  -   US dollar/Japanese yen
• GBP/USD -  British pound/US dollar
• USD/CHF -  US dollar/Swiss franc
• USD/CAD -  US dollar/Canadian dollar
• AUD/USD -  Australian dollar/US dollar
• NZD/USD -   New Zealand dollar/US dollar.

MINOR CURRENCY PAIR:

• EUR/GBP — Euro/British pound
• EUR/AUD — Euro/Australian dollar
• GBP/JPY — British pound/Japanese yen
• CHF/JPY — Swiss franc/Japanese yen
• NZD/JPY — New Zealand dollar/Japanese yen
• GBP/CAD — British pound/Canadian dollar

EXOTIC CURRENCY PAIR:

• EUR/TRY - Euro/Turkish lira
• USD/HKD -  US dollar/Hong Kong dollar
• JPY/NOK  -  Japanese yen/Norwegian krone
• NZD/SGD  - New Zealand dollar/Singapore dollar
• GBP/ZAR  - British pound/South African rand
• AUD/MXN - Australian dollar/Mexican peso.

But we will often find out only the major and minor currency in the trading platform because those two currency pair will have the highest spread value to trade them compare with exotic pairs.

BEST PAIR TO TRADE?

    If you are new to forex platform then always first deal with Major currency pair. If you got some familiar from major currency pair then you can deal with the minor pair.

These pair always have some highest spread to trade.

If your mind asked what about the exotic pair

yeah! You can trade with this pair too.

But these kinds of exotic pair has some difficulties to trade like the exotic pair has less liquidity level and less spread value.

until you get familiar with the major and minor currency you can deal with the exotic but in my case, if you were a beginner and intermediate better to move on with Major and minor pair.

ADVANTAGE OF MAJOR CURRENCY:

Huge liquidity,

These are the currency will always high demand in the forex market.

Earning interest will be higher.

Creditworthy and the financial will be high.

INTEREST RATE OF CURRENCY:

   Whenever you are trading with the order if the pair you analysed is a bullish trend(upwards).

you are supposed to buy a currency pair and sell it when the analysing price reached.

For example,

When you are dealing with EUR/USD, The thing if your analysis is bullish trends you are purchasing the order so you will be buying it EUR and when the price is hit maximum you are selling it USD.

EUR/USD

EUR--> Buying 

USD -->Selling 

These things will happen vice versa for bearish (downtrends).

whatever the currency you are dealing has the interest trade taken out by the central banks.

So, When you bought (EUR) and Sold it (USD) There will be specific interest rate is obtained. When you dealing with this order you need to pay a certain interest rate for every order.

And we have the privilege of earning the interest in what we bought the order.

for example,

(EUR/USD) When the Euro has 5% of interest value and United States dollar(USD) has 0.5% of the interest rate.

A base point in simply as 1/100th of 1%. So, 

EUR has 500 bases and USD has 50 bases. If you deal with EUR/USD you will earn 5% from EUR and Pay 0.5% of bases.

  So, Your net return will be 450 bases.

HOW IT'S WORK?

  Currency trading or forex exchange is a 24 hours market running only in weekdays. The main currency will be mostly trade-in market hours.

  Normally in India the forex exchange market has grown in between 2004 - 2007 is 384% to an average of 34Billion/ day.

According to the global world 5.1 Trillion US dollar per day. https://en.wikipedia.org/wiki/Foreign_exchange_market

Awesome to hear this right!!

When we are getting into the main topic:

FOREX:

   Currency trading has various size lots.

•    Macro lots,
•    Micro lots,
•    Mini lots.

Lots are defined in many ways 10,100,1000,10000,100000.

EXCHANGE RATE

    The exchange rate is set for every currency when we dealing with buy/sell order. Every currency has some unique interest rate which will differ every time.

   Before calculating the value of one pair we need to know the interest rate of that specific pair. Try to google it and find out the interest rate of every pair once a week or month.

Interest rate are mainly classified by two ways one is 

•   Floating rate 
•   Fixed-rate

FLOATING RATE:

 Determined by the market price when the supply and demand are getting high.

 The price will be more.

FIXED RATES:

  Determined by the central banks. The rate will be set only with the major currency like united states dollar, Euro, Yen.

 When our interest rates stay low are failed then our adjustable floating rates gives the potential to your order and save you a lot of money in which pair of currency you had ordered it.

 According to my suggestion floating rates will be always best to compare with fixed rates. Every bank and related currency pairs have their specific interest rates. whenever we are assuming or calculating we need to check the interest rates.