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Opening Online Forex Trading Account in a minute easily

Opening a trading account with an Online Forex broker has never been easier.

By visiting their websites and selecting the “Start Trading” button, an investor is only a few clicks away from gaining access to the dynamic world of Forex.

The application form is unobtrusive and is in line with all the modern guidelines of their financial regulators.

An investor can invest funds into a wide range of base currencies. Deposits are accepted from a wide variety of globally accepted and respected payment providers.

Opening a Forex account is absolutely Free.

In the unlikely event that an investor has difficulty in completing the account opening process, normally Forex brokers offer their clients LIVE 24/5 CUSTOMER SUPPORT through LIVE CHAT function.

Alternatively an email can be sent to their support teams.

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Start Trading Forex in a few minutes

Not like 10 years ago, but now “opening a Forex trading account” is really easy and simple.

With many online Forex brokers, it is possible to start trading Forex in a few minutes.

Here are the steps you need to follow in order to start trading Forex and CFDs online.

  1. Sign up with a Forex broker
  2. Verify your information by sending documents(ID and Proof of Address) to email
  3. Make a Deposit
  4. Download the trading platform
  5. Start Trading

By using your credit/debit card or other online payment companies, you can fund your trading account instantly.

The verification of your information may take a few hours to one day though, it can be done later and normally you can start trading without it.

No complicated processes at all, but it is the standard process for majority of Forex brokers in the world.

The reason why currency prices are changing

At least one time, you might have wondered why do Forex market exchange rates move?

We live in a world where interest, inflation and growth rates vary from country to country. Big cartels such as the ‘‘Organization of the Petroleum Exporting Countries, (OPEC) dictate the supply and therefore the price of Oil.

Geo-political issues affect the markets (e.g. the Ukrainian crisis, or a general election in the UK or Germany). Maybe bad weather destroyed the wheat harvest, and this results to a spike in the price of bread.

Additionally, prices move because global events are always in a state of flux. This has a direct impact not only on demand and supply but more importantly our expectations.

Supply and Demand in Forex

Not just commodities or stocks, but there are also “Supply” and “Demand” in the Forex market too.

If you compare the USD and EUR, and investors want EUR more than USD, then the price of EUR will go up against USD. It is the same for all currencies.

But how the investors decide if they want EUR rather than USD?

There are many factors that will impact the prices of currency exchange. Such as political events, natural disasters, economical data release and press release by some important figures in financial markets.

For example, if the president of the central bank of Europe says the economical prospect in Europe is very disappointing, many investors would probably sell EUR and buy other currencies, because they expect the price of EUR will go down.

Basically, you can expect the price of a currency will go up if something positive is seen and vice versa.

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The standard units in Forex are “Pips” and “Points”

The pip can be described as the smallest incremental movement for a currency, which is usually the fourth decimal place (It can sometimes though be the second).

For example, if EURUSD is quoted at 1.0615 and then moves to 1.0616 that means that the EURUSD exchange rate increased by 1 pip.

But now that the technology has been improved so much, majority of Forex brokers adopt “5 decimal points” to show their price quotes.

So the price of EURUSD will be displayed as 1.06151 but not 1.0615, for example. In this form, the smallest incremental movement is counted as “point”. and the second one from the right is the “pip”.

Please remember that 10 points equals to 1 pip, and the smallest incremental movement you are seeing with your Forex brokers is most likely the “point” but not “pip”.

Still many Online Forex brokers use “pip” but not “point” to count their trading costs and in other situations.

Forex “Spread” is the Standard Costs charged by your Forex Broker

As with all tradable markets there is a cost to buy and sell a given financial instrument. Most markets quote this price as a spread.

In simple terms the bid is the price a counterparty is willing to buy a financial instrument from an investor. Whereas an offer is the price a counterparty is willing to sell a financial instrument to an investor.

It is only logical that the counterparty is going to aim to purchase the instrument at a lower price than it would want to sell it.

This difference in bid/sell and offer/buy is called the spread, and the spread is the cost of doing business.

The provision of advanced charting and complex trade management systems to clients is an extremely expensive undertaking.

If one then adds in the cost of employing skilled and highly educated technicians to run the platform, investors can imagine that running a Forex brokerage firm is a very serious and expensive business.

Forex Terms “Long” & “Short” and Profit Calculation Examples

The Forex Market allows market participants to either purchase or sell a currency pair.

When a trader for example buys GBPUSD, the Pound (GBP) can be described as LONG United States Dollar (USD) can be described as SHORT.

The act of going long, would imply that the investor wishes that the Base Currency appreciates in value and the Counter Currency depreciates.

Investors are therefore effectively taking a financial bet that the Counter Currency will lose value.

Profit/Loss Calculation Examples of Forex

EXAMPLE:

An investor decides to buy GBPUSD and open a position of UK£1,000.00 at a rate of 1.4750.

By entering into this transaction the investor has obliged him/herself to purchase UK£1,000.00 and sell USD 1,475.00.

If subsequently the exchange rate rises to 1.4800, the result for the investor would be that now he/she can receive more US Dollars for every 1 Pound Sterling. In simple mathematic terms:

OPENING POSITION

The investor buys GBP 1,000.00 and sells 1,475.00 @1.4750.

CLOSING POSITION

The investor sells GBP 1,000.00 and buys 1,480.00 @ 1.4800.

This produces a profit of USD 5.00.

To go short would imply that the investor believes that the Base Currency is overpriced and the Counter currency is under-priced.

For example an investor takes a view to short GBPUSD

OPENING POSITION

The investor sells GBP 1,000.00 and buys 1,475.00 @1.4750.

CLOSING POSITION

The investor buys GBP 1,000.00 and sells 1,470.00 @ 1.4700.

This produces a profit of USD 5.00.

To GO FLAT means that the size of the long positions equals the size of short positions.

This leaves the investor perfectly hedged but does run the risk of building up considerable swap fees if positions are not liquidated.

Flat, however can also mean that investors have no open long or short positions.

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Forex “Leverage” and “Margin” explained with examples

By means of leverage an investor is able to control a much larger position than their equity balance would allow.

This is possible because majority of Forex brokers offer beneficial leverage terms.

What is Leverage?

Leverage is a powerful tool that allows traders to take the maximum benefit from price moves in the Forex Market.

Leverage is effectively a loan made to a trader by the Forex Broker. This loan is automatically activated by the MT4 Trade Manager as soon as an investor opens position an open.

The average leverage offered by standard online Forex brokers is the leverage of up to 1:500.

The highest Leverage in the world is 1:3000.

So Why do traders need Leverage?

Let’s recall a previous example.

An investor buys GBP 1,000.00 and sells 1,475.00 @1.4750.

A standard lot of has a value of 100,000. Therefore without leverage the investor would need GBP 100,000 to open a position of 1 Lot in GBPUSD.

However with a leverage level of 1:100 and account balance of GBP 1,000.00 allows the investor is able to open and control a position of GBP 100,000.00.

A move from 1.4750 to 1.4800 equals to 50 pips, which generate a return of just USD 500.

This sounds all good, but leverage is a double edged sword. It will magnify the size of one’s profit but also ones loss.

Forex “Margin”explained

You can think of margin as a loan from your brokerage. Margin trading allows you to buy more than you would be able to normally buy.

BACK TO OUR PREVIOUS EXAMPLE

To open a position of 1 Lot of GBPUSD at a leverage level if 1:100 requires a GBP 1,000.00.

The Margin calculation being:

Position size = 1 Lot valued at GBP 100,000.00

Leverage = 1:100

MARGIN CALCULATION = POSITION / LEVERAGE

Margin = GBP 1000 or (GBP 100,000 / 100)

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