Forex Trading

Forex is an abbreviation of the words ‘foreign’ and ‘exchange’. More accurately, it is a shortened version of ‘foreign currency exchange’ because it refers to transactions where one currency is sold to buy another. While we have all engaged in casual forex when we travel internationally, forex trade refers to currency transactions with the intention of making a profit.

Forex trade is a major segment in the international finance industry. It is worth about $220 billion per hour, a figure that adds up to a value of over $5 trillion every single day.

Market10 is an online trading platform that gives you the knowledge and the technology to trade wisely and efficiently. You also benefit from the expertise provided by our team of accredited account managers.

How does Forex trading work?

The value or ‘strength’ of every currency in the world is in constant flux. A country’s employment statistics, economic forecast, and central bank decisions, as well as international market sentiment and current affairs, are just some of the many factors that drive its currency up or down.

This up or down movement in forex refers to currency pairs, any two currencies that are listed on the forex market.

Currency Pairs

Virtually, every nation has its own unique currency, which means that there is a very large number of currency pair combinations. However, almost 80% of world forex transactions involve seven (7) currencies, namely USD (US Dollar), EUR (Euro), GBP (British Pound), JPY (Japanese Yen), CHF (Swiss Franc), AUD (Australian Dollar) and CAD (Canadian Dollar).

The forex market focuses on four (4) major categories of all the possible combinations:

• Major pairs – These are combinations of the USD with the other six (6) currencies, most popularly USD/EUR, GBP/USD, USD/JPY, USD/CHF, and AUD/USD.
• Minor pairs – This refers to forex transactions between the major currencies with the exception of the USD. Common minor pair combinations are EUR/GBP, EUR/CHF, EUR/AUD and GBP/JPY.
• Exotics – An exotic pair is usually trade between one of the seven (7) major pairs and currency of a smaller, emerging economy. Some popular exotic pair combos are USD/MXN (Mexican Peso), USD/KRW (Korean Won) and USD/SGD (Singapore Dollar).
• Regional pairs – As the name suggests, these are forex trades between nations that are geographically close. In the European region, this may be EUR/NOK (Norwegian Krona) while AUD/NZD (New Zealand Dollar) is an example from the Australasian region.

Please note, that there is no physical exchange of any currency when you trade forex at Market10. Instead, you are simply speculating whether the currency you buy will be stronger against the currency you sell. This is the sense of a CFD/Forex trading transaction.

Forex Trading Markets

You can trade forex 24 hours a day, 5 days a week (Sunday evening to Friday evening). This all-day opportunity to trade is possible because there are four (4) main forex markets spread across 4 time zones – New York, London, Tokyo, and Sydney.

Within these markets are three (3) different categories of forex trading:

• Spot forex – The name here refers to an ‘on the spot’, i.e., an immediate or very quick transaction. Spot forex involves the physical exchange of currency pairs.
• Forward forex – This type of forex trade locks in the buyer and seller to a fixed conversion rate at a set point in the future. Both the rate and the time period are fixed by the parties involved and not usually available publicly. It is unusual to have a renegotiation of the terms before the contract ends.
• Futures – Futures are a less rigid version of forward forex. They allow parties to continually update and modify the terms of the contract, a factor that also makes them very volatile.

Leverage and Spread in forex

Forex for individual investors is almost always an OTC (over-the-counter) product, which means that it consists largely of spot forex. This can be expanded to include other variants based on the value of your trading account with Market10.

Market10 gives you extraordinary access and versatility because we allow you to trade with leverage. Leverage refers to the factor by which we subsidize your initial investment when taking a position.

While you would need to deposit at least 50% with a standard stock trading account at a traditional broker, you can outlay as little as 5% of your trading value for a forex position with Market10. This allows you to trade on a much larger volume than would otherwise be possible.

The amount of leverage may increase or decrease depending on your trading history, the type of transaction and other factors. Please note, that a spread does apply to every forex transaction. This refers to the difference between the quoted rates of a currency pair on the currency exchange and the figure available to investors.

For example, if the official GBP/USD rate is 1.350, you may get a rate like 1.355 to buy and 1.345 to sell instead. A spread allows for fluctuations in the quote from when you inform us of your intent to trade on that currency pair and when we actually do so on currency exchange.

How to trade on forex market?

Many investors are reluctant to enter the markets because they perceive trading to be complicated. It is definitely an advantage to have some basic knowledge of how financial investments works, and Market10 makes it even simpler.

The first step is to decide on the currency pair that you are interested in. This may depend on the price at which it is available compared to its price history and future projections. Once you have decided that, contact the forex trading company and tell them the amount that you want to invest.

Some companies may allow you to purchase the currency pair on credit, using the leveraging method we explained earlier. Please note that you may be liable for interest on the credit that is extended to you.

In a spot purchase, all you have to do is wait for the value of the currency that you bought to rise above the initial price and the spread. You can cash in your investment when you believe that the trend might go negative. If the currency you bought falls below its initial value, you can wait for a reversal or take a loss and pull out.

In either case, you will have to contact your trading company to finalize the transaction. Your profits will be sent directly to your account. In case of a loss, you may have to transfer cash into the account if it falls below the leverage extended to you.

Forex market Psychology

Trading psychology is arguably as important as trading knowledge. The term refers to your attitude and response to changes in the market that affect your investments. Good trading psychology is developed over time and consists of avoiding these pitfalls:

Overconfidence OR ‘I ‘know’ that the price will rise/fall’

This stems from projecting a small trend into something larger without the evidence to support it.

Hope OR ‘I will carry on this losing strategy in the hope that things will change’

It can be difficult to cut your losses, and even more difficult as the losses increase.

Panic OR ‘I am in too deep’

Panic can push you to make drastic decisions in haste without considering better alternatives.

Market10 USP

Market10 is an online trading platform that allows you to trade forex with currency pairs from around the world. Our low fees and charges, as well as our narrow spreads, give you the opportunity to trade with a competitive broker even when you make a small financial investment.