What is Forex?
Why Trade Forex?
Forex is favored by multiple types of traders from professional to complete beginners. It is a diverse market; most brokers offer an extensive list of currencies and each currency is affected differently, allowing you to skirt risk when things get volatile or seize opportunity from multiple instruments. One currency might be jumping around, and another might not even move from its previous day’s price (or rate).
Another reason people favor the Forex markets is because of its volatility; although this increases risk, it also increases opportunity. This is especially true if the strategy you are using depends on making trades throughout the trading day.
The high volume of transactions in the forex market allows traders to buy and sell without any delays caused by a lack of buyers or sellers. Forex is also a purely global market. It is wide reaching and diverse, meaning when certain currencies are volatile, others are not. Time is also a benefit; the forex market is open 24 hours a day, 5 days a week. The forex market opens in sessions:
|Sydney (Australia) Open||9.00 PM|
|Sydney (Australia) Close||6.00 AM|
|Tokyo (Japan also known as the Asian Session) Open||12.00 AM|
|Tokyo (Japan also known as the Asian Session) Close||9.00 AM|
|London (UK also known as the European Session) Open||7.00 AM|
|London (UK also known as the European Session) Close||3.00 PM|
|New York Open||12.00 PM|
|New York Close||9.00 PM|
No Slippage: Trade Without Delays
easyMarkets offers trading without slippage on its proprietary platforms. This means that the rate you open the trade is the rate your trade is executed. This is important because in non-CFD trading, your trade may execute at a higher or lower price.
This is because when selling or buying non-CFD currencies, transactions need to be “matched”, i.e. if you are selling, a buyer or buyers need to match your trade. If someone (or a group of people) isn’t trading the opposite of your trade, you have to wait until they do.
Some CFD brokers do not offer zero slippage guarantee, so this is another distinct benefit you have access to when you trade on easyMarkets platform and app . Trading with slippage can cause unforeseen costs or smaller profits because the trade opens or closes at a different rate than you wanted it to be executed. This effect becomes especially amplified during
Another reason the forex market is popular is due to the availability of leverage. Leverage is a trading condition that allows the trader to increase the size of their trade. Of course, as the size of your trade increases so do your margin requirements and risk. Because of the increased margin requirements, a smaller negative move will cause your trade to close.
Forex Currency Pairs Explained
In forex trading currencies are usually expressed in pairs (sometimes referred to as crosses). They are usually displayed as:
In the pair above EUR is called the base currency and the USD is the quote currency. The base currency is 1 and the quote currency is how much it’s worth in the base currency. For example if EUR/USD is 1.08, it means 1 Euro is worth 1.08 U.S. dollars.
Majors, Minor and Exotic Currency Pairs
Currency pairs are usually separated into major, minor and exotic currency pairs. Major currencies always involve the USD and one of the following:
Major currency pairs are favored by new traders because of their high liquidity and large amount of available data. News outlets frequently cover events which affect these currencies. Also, many commodities including Oil, Corn, Cotton (to mention a few) and most commercial and precious metals are bought and sold in USD.
Minor currency pairs include the currencies in the list above, but not the USD. For example; AUD/JPY, EUR/CHF, EUR/GBP are minor pairs. Minor pairs also offer large amounts of data, since most of the currencies involved are some of the market’s most popular.
Exotic pairs involve currencies from developing countries and a major currency, such as USD/MXN. These pairs can have less liquidity, depending on which currencies are involved, and are usually considered to be significantly more volatile than major pairs or crosses. As such, exotic pairs are preferred by more experienced traders to round off their portfolio with higher risk trades.