If you want to become a trader and use a specific trading instrument such as Forex, there are some specifications about it that you need to educate yourself before you dive into the world of trade.
When Forex Trade is open?
Actually, there aren’t working hours for the forex trading market. It is open twenty-four hours a day during the working week; it closes at five o’clock ET in the afternoon on Friday, and opens at five o’clock ET in the afternoon, on Sunday. So you can start trading at any time you want, but the trick here is that there are certain hours when trading is much better due to the market activity at the present moment.
Another positive thing here is that you can trade worldwide. The first continent that opens the forex trading market is Asia. Japan here is of course known as the biggest player on this market. After that the Middle East starts on the forex market, followed by Europe and the United States. So if you want to start trading worldwide, not only on your continent, you need to be careful about the time difference, and to follow the periods when the market there is most active. For example, when in Asia is six o’clock in the afternoon, it is three a.m. ET, and this is approximately the time when Asian market is most active.
What do you actually trade when going on the forex trade market? How to read the quotes?
When you trade on the forex market, you do this with different currencies and you deal with their exchanging rate. If you want you can work with dozens of unique currencies, but for doing this it is essential that you are able to read the pair symbols and the different quotes.
When you take a look at the currency quotes, you will notice that all the currencies come in pairs, like GBP/USD, USD/JPY, EUR/USD for example. There is a simple reason for this- when you buy one currency, at the same time you are selling another. And there is a standard look for this type of currency pair – it looks like this – EUR/USD = 1.3720. The first one is the base currency. This is the currency that you are buying or selling and it is always equal to one.
The second one is called the quote currency, or sometimes you may find it under the name secondary or terms currency. This is the currency price that is being quoted. Like in the example above, if you want to buy one Euro, you will have to pay 1.3720 USD for it. And if you are selling one Euro, you will receive the pointed amount of American dollars.
Other specific terms concerning the forex market
Bid and ask price – the first one is the price that you have when you are buying, and the second one is the price that you want when you are selling the currency.
Spread is the difference that you have between the bid price and the ask price. And the pip is measuring the slightest changes in the currency course.
So when you are looking at one currency pair, the fist number is the price for selling (ask) and the second number is the price that for buying (bid). Because the difference between the selling and the buying price is really small, most of the times only the last two numbers are used. Like in this example – EUR/USD =1.2510/12. And if you want to calculate what the pip in this example is, the result is 0.0002.