What is Foreign Exchange Trading
Actually forex is a term to describe the exchange of foreign currencies or foreign exchange (forex). By doing that activity, there is a trading process because the value of each currency is different.
There are financial benefits that you can get from forex activities. The advantage is derived from the difference in the exchange rate when bought and sold on the forex market.
Reporting on the The Balance, people often consider Forex as a gamble because there is a bet between high risk and high profits. However, Forex even has a place in the Financial Services Authority and the Commodity Futures Trading Regulatory Agency .Thus, you have to understand all the information about forex before having an opinion and being involved in it.
People who play forex are called traders. In trading, there is a broker / brokerage company that facilitates your trading activities. Through this broker, you can analyze the forex market.
How Does Foreign Exchange Trading Work?
The way forex works is actually simple. Those of you who have experience in mutual fund investment. Even those who have saved dollars can understand it more easily.
There is one term in the workings of forex that you must know, that is PIP (Percentage in Point). PIP shows 4 decimal places in foreign currencies, except for the Japanese yen (JPY) which applies to 2 decimal places.
PIP is the point of increase or decrease in exchange rates traded from opening to closing of the transaction.
For example, the transaction opens at 1,500, then the chart jumps to 1,550 at closing. It means that there is an increase of 20 PIP, which is our profit as a trader. If it goes down, it means we lose baed on the PIP value.
Forex brokers generally provide a forex calculator to calculate losses or profit transactions. However, they also have an application that automatically calculates profit or loss in trader’s transactions.
The broker also provides a transaction demo for learning. For those who have started to understand about forex, you can try demo transactions provided by brokers.
Read more: Binance U.S. to Launch Trading With 13 Currency Pairs
