What is Forex？
Forex/FX is commonly referred to as "foreign exchange", which is specially used to describe investors and speculators to buy and sell foreign currency in foreign exchange market."Buy low/sell high" is the most familiar term applied to foreign exchange transactions. Traders long the currency at a low price and the short the currency at a high price, exactly the same as stock traders buy stock at a low price and sell the stock at a high price.
What Is the Common Bid and Ask Method？
Mostly, every currency is represented by three English letters, such as USD is used to present US Dollar, EUR is used to present Euro currency. Currency pairs provided by Kiwibull include:
The exchange rate is presented by pairs, like EUR to USD or USD to JPY. The first currency is referred as "base currency", while the second one is called "relative/quote currency". The base money is the benchmark for buying or selling. such as, if you expect the exchange rate of EURO against USD is going to increase, you will buy EURO/USD while at the same time to sell USD. If you believe exchange rate of EUR against USD, the need of USD is going to increase, you will sell EUR/USD, meaning you will buy USD at the same time.
What is Lot？
Currencies are traded in fixed contract sizes, specifically called lot sizes. 0.1 lot is the minimal trading size. One standard lot equals to 10 pieces of 0.1 lots. And in Kiwibull platform, 0.1 represents 10,000 units of the currency. But, as long as the trading volume follows the minimal changes as 10,000 units, the account holder could set up difference sizes of trading volume.
What is the Spread？
Each currency pair has two prices. The difference between the two prices is called spread, or trading cost. As shown in the bellowing, the bid and ask difference is 2.5, each lot of trading volume amounts to 10000 USD, each one point of EUR/USD trading currency equals to one USD.
What is Pips？
Pips is the unique unit to calculate the profit and loss. The bidding price of most pairs of currency is accurate to five digits(except to JPY). Traders normally focus on the changes of fifth digit in each biding prices, and each change of that digit is called one pips. Like, if EUR/USD increased from 1.4022 to 1.4077, EUR/USD has increased 5 pips.
What's the Leverage？
As stated above, all the trading fund is traded with borrowed money by using leverages. 1:100 leverage ratio allows you to deposit 10 USD as margin to trade the volume of 1000 USD in the market, which means you could use minimal amount of your own money to trade times of more money to earn money, on the other side the risk of loss also increase. So using leverage is not suitable to all traders in the market.
The margin refers to the practice of buying an asset where the buyer pays only a percentage of the asset's value. It could be traded as the deposit money for the trading, but not the trading cost or service charge. To learn more about margin requirement in Kiwibull.
Overnight Interest Rate
If traders hold the position for more than a day, traders have to pay the interests between the bid and ask currency pairs. For example, assume the current GBP interest rate is 2.5% while the current USD interest rate is 1.7%. If trader buying GBP and selling USD, theoretically the trader will earn 0.8% overnight interest rate due to the different current interest rate of the currency pair( in reality, the overnight interest is lower by deducting the administrative cost). If the trader selling GBP and buying USD, the trader has to pay for the overnight interest cost. Even thought the overnight interest is small, but the leverage function will increase the total amount.
* The leverage will cause huge profit or loss without proper risk management.
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