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Forex Basics Lessons

Forex(FX) or Foreign exchange market is a global marketplace for exchanging national currencies against one another. Because of the worldwide reach of trade, commerce, and finance, forex market is the world’s most traded market, with turnover of $5.1 trillion per day.

Forex is always traded in currency pairs – for example, EUR/USD (EUR v United States dollar). You speculate on whether the price of one currency will appreciate or depreciate against another currency.

 

Most providers split pairs into the following categories:

  • Major pairs - seven currencies that makeup 80% of global forex trading. Includes EUR/USD, USD/JPY, GBP/USD and USD/CHF
  • Minor pairs - less frequently traded, these often feature major currencies against each other instead of the US dollar. Includes: EUR/GBP, EUR/CHF, GBP/JPY
  • Exotics pairs- a major currency against one from a small or emerging economy. Includes: USD/PLN, GBP/MXN, EUR/CZK

With Finveo you will be able to trade with CFDs (Contract For Difference). When trading forex, you speculate on whether the price of one currency will rise or fall against another.

 

Once you have learned some basic essential principles, the best way to start is with a demo trading account.With a demo account, you can experience live market movement with live data and virtual money. In this way, you get real trading experience without risking any of yours capital. This is a good way for an experienced trader to test new tactics and analytics. However, down side of demo account is that with virutal money, you are not experiencing emotional thrill like when you do with real / Live account.

 

If you feel confident with knowledge in Forex, go for a Live account. Our minimal investment is $100. With leverage 1:100 you'll be able to manipulate with 10 000 USD.

 

When we speak about Forex, there isn't a CEO sitting somewhere in a chair. Forex is made by several institutions and it is proud to be called largest and most liquid asset market on earth. However, it has main participants and they are larger international banks (major banks), electronic broking services, financial centers around the world (medium and smaller banks), retail market makers, Hedge funds and retail traders. Forex is decentralized market which means that whole business is being conducted online, no physical location where investors go to buy and sell currencies.

Forex market is open 24 hours a day, five days a week from Sunday evening until Friday night. This is due to the various international time zones which allow you to trade 24/5.

 

Forex market is made up of banks, different commercial companies, central banks, hedge funds, investment management firms, retail Forex brokers and investors around the world.

 

 

International currency market is not actually dominated by a single market exchange, but instead, entails a global network of exchanges and brokers throughout the world. Forex trading hours are based on when trading is open in every participating country.

 

 

4 major Forex trading sessions are as follows:

 

  • London
  • New York
  • Sydney
  • Tokyo

Among all other markets, forex generates the largest turnover. This market with an approximate daily volume of $5.1 trillion, it has unique characteristics that give an edge over traditional equities and futures markets.

 

Market operates 24 hours a day. So there are buyers and sellers all the time, somewhere around the world, who are actively trading forex. Traders can respond to breaking news on an immediate basis.This is quite different from other markets, such as futures, where trading times depend on the underlying commodity, market or asset and those markets have limited availability for a small part of the day.

 

 

Forex trading has no such restriction due to the fact that FX market gives superior liquidity amongst all other markets. The sheer size of the market and staggering number of market players leads to huge trading volumes.

 

 

One key difference between forex trading and other market investments is that forex trading is cost-efficient. Most forex accounts trade without commission, expensive fees or data licenses. While in other markets, you must pay commissions to brokers alongside the spread amount, forex brokers often offer trading tools and market information as part of their free services.

 

 

Forex market also offers highest leverage levels. Leverage can enable clients to trade much higher amounts than their actual deposits.

 

With Finveo you can place CFDs on Forex (FX), commodities, indices and cryptocurrencies.

 

The foreign exchange market is also known as FOREX or FX and it is financial instrument where currencies are traded. They are coming in pairs and there are three categories – majors, minors and exotics.

 

 

Commodities are another calls of assets just like stocks and bonds. A market which trades in goods such as coffee, coccoa, and mined products such as gold and oil. Major commodities include oil, gas, gold etc. Basically, they are the raw materials needed by large manufacturing companies in running their businesses. There are different types of Commodities such as Agricultural, Energy and Metals

 

 

Indices are a measurement of the price performance of a group of shares from an exchange. Indices are a highly liquid market to trade. Most popular are Dow Jones, S&P 500 and Nasdaq Composite.

 

 

Bitcoin CFD tracks the price of Bitcoin, most popular cryptocurrency. This is allowing you to trade it without having to own or manage any Bitcoin itself. For those familiar with financial markets but not cryptocurrency, this can be a convenient way to trade.

 

CFD (Contract For Difference) is a financial instrument that gives you the opportunity to trade on with a certain type of product (usually stocks, currencies, indices, cryptocurrencies, commodities), in a way that you do not take physical ownership of the underlying asset.

 

CFD trading gives you the opportunity to make a profit regardless of the movement of the product price. Some of the benefits of CFD trading are that you can trade on margin, which means that you can magnify the returnes on your investment but it is important to remember that losses will be magnified as well. With CFD you may place Buy and Sell position whether you project that market is going to rise or fall.

 

 

CFDs are leveraged products, this is called ,,margin trading'' and it means that your initial deposit will be multiplied by maximum 1:100 with Finveo.

 

 

Example: With 1000 USD of investment, You will be able to open position in total value of 100 000 USD.

 

When trading CFDs, you must pay the spread, which is the difference between the buy and sell price. You enter a buy trade using the buy price quoted and exit using the sell price. The narrower the spread, the less the price needs to move in your favor before you start to make a profit. We offer consistently competitive spreads.

Currencies are always quoted in pairs, such as the EUR versus the U.S. dollar (EUR/USD). The first currency is called the base currency, and the second currency is called the counter currency or quote currency (base/quote).

 

For example, if you take €1.00 (EUR) to buy $1.1889 (U.S. dollar), the expression EUR/USD would equal 1/1.1889. The EUR would be the base currency and the USD would be the quote or counter currency. This means that 1 euro can be exchanged for 1.1889 USD.

 

A pip is an abbreviation for “point in percentage” and represents the smallest unit of change in the value of a currency pair. For most currency pairs a PIP represents the fourth decimal place in the exchange rate of the two currencies, ie. 1pip = 0.0001 or 0.00001. except for currency pair USD/JPY.

 

  • Example:
  • EUR/USD 1.1960 to 1.1962 which is a 2 pips spread.
  • USD/JPY 108.92 to 108.95 which is a 3 pips spread.

 

Lot represents the size of your trades in Forex. In another interpretation, Lot is the number of currency units you will trade in Forex. There are 3 main types of Lots: Standard Lot (1), Mini Lot (0.1), Micro Lot (0.01).

 

  • Standard Lot: 1 standard lot is equivalent to the volume of 100,000 units.

  • Mini lot: 1 mini lot is equivalent to the volume of 10,000 units.

  • Micro lot: 1 micro lot is equivalent to the volume of 1,000 units.

 

The minimum trading quantity for each product is 0.01 lot, up to the available amount that the client has for trading.

When you open a position, you determine the quantity in lots, and each lot contains a certain number of products that you want to buy or sell. Namely, a lot represents a standardized quantity of a traded product, for example:

  • 1 lot of gold is 100 ounces of gold.

  • 1 lot of oil is 1000 barrels of oil.

  • 1 lot of a currency pair is 100,000 of base currencies.

Margin is the amount of funds that is required from trader to maintain his position open on the market. Since a trader is using leverage he is allowed to trade with bigger amount that he initially deposited. So, the margin is representing share of your capital that is set aside and frozen as a deposit to open a certain position.

For example, if you are trading with a x100 leverage and you open 0.5 lot position, instead of 50 000 USD your reserved margin is 500 USD.

One of the basic characteristics that makes CFD attractive product is leverage. Leverage allows you to open larger positions with small amount of your money.It is increasement of your buying power.

 

Example: You have 1000 USD on your account, if you use our leverage of 1:100 you would be able to open a position of 100,000 USD (or 1lot) and act is if you invested 100,000 USD! The physical money on your account would still be 1000 USD but your investment is increased 100 times.

 

 

Notification: We have Negative balance protection which means that you can only lose money you have on your account, nothing more than that. We are also equipped with Margin call and Stop out level.

 

A swap in Forex refers to the interest that you are charged for a trade that is kept open overnight.

Swap is charged on daily basis on all positions left opened after a trading session ends. There are two types of swaps: Swap long (used for keeping long positions open overnight) and Swap short (used for keeping short positions open overnight).

They are expressed in pips per lot, and vary depending on the financial instrument you’re trading.

If you feel confident with knowledge in Forex, go for a Live account. Our minimal investment is $100. However take a look at account types that we offer and depending on your experience, investment doesn't have upper limit.

In Forex as in all trading markets, to go long means to buy asset with expectation that your position will rise in value. To go short means once when you sell position on trading market expectation is that same position value fall. Traders are guided by old saying: „Buy low, sell high“.

We have Negative balance protection which means that you can only lose money you have on your account, nothing more than that. We are also equipped with Margin call and Stop out level.

Efficient use of your capital. One of the basic characteristics that makes CFD, attractive product is leverage. The leverage allows you to achieve a much larger position with a smaller amount of money. It is an increasement of your buying power.

 

Trade a huge variety of markets. You can use CFDs to trade over 17,000 instruments, including shares, indices, commodities, forex, cryptocurrencies and more. You don’t have to access multiple platforms to trade different instruments. You can find all of them under our roof easily accessible via your web browser, phone or tablet.

 

No stamp duty. Unlike traditional share dealing, there is no duty stamp to pay on a CFD trade as you don't take physical ownership of the underlying asset.

 

Trade in both directions. With CFD trading, you can trade and benefit with the product regardless of whether the market strengths and weaknessess in value.

 

Inside CFD trading you may find three different kinds of costs. Spreads, Commisions and Swaps.

 

 

 

Spread: Is a difference between the buy (offer) and sell (bid) prices quoted for an asset. Spread is introduced as fee for trading with us no matter what size or instrument is being used by trader.The narrower the spread, the less the price needs to move in your favour before you harvest benefits of trade you made. We offer consistently competitive spreads.

 

Commission is a service charged by Finveo for handling purchases and sales of securities for traders. See our prices by pricing groups.

 

 

Swap in Forex refers to the interest that you are charged for a trade that is kept open overnight. You can access our swap rates here

 

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your funds.

 

Leverage allows you to open larger positions with small amount of your money. It is increasement of your buying power. Risk management policy should be in place.

 

Market volatility and rapid changes can cause balance of your account to change quickly. If you do not have sufficient funds in your account to follow price movements, there is a risk that all opened positions will be automatically closed by Margin call.

 

Holding costs/Swaps are applied to your account on a daily basis. In some cases, particularly if you hold positions for a long time, sum of these holding costs may exceed the amount of any profits.