FOREX
Forex is the short form of foreign exchange market. It's the world's largest market where currency are exchanged, presently with a daily volume of $5.3 trillion. Investors, institutions, traders and banks exchange, buy and sell world currencies. Trading on Forex market is done 24 hours a day, 5 days a week.
The sole aim of forex trading is to gain profit. You buy a currency at one price and then sell at a higher price or you sell a currency at a price and buy at a lower price. All transactions made on the Forex market involve purchasing and selling simultaneously.
The currency is in pairs, the base currency and a quote currency. One of the most common pair is used on Forex market is EUR/USD
Base Currency, is the currency that appears first in a pair. It is always sold or bought in exchange for the quote currency.
You should be aware that forex prices are always in four decimal places because the difference are very minute. Though , there's no specific rule guiding the number of decimal places that is used for forex quotes.
Trades in currencies are often worth million on the Forex market, so small bid-ask prices differences has a potential of adding up to a significant profit but such large trading volume can also mean that a small spread can also equate to significant losses. You should always trade carefully and consider the risks that are involved.
The major term used in forex is called Position.
•Position: It's used to describe a trade in progress.
•Long position: This means that the trader has bought currency expecting an increase in its value.
As soon as the trader sell the currency back to the market at higher price, his long position is closed and the trade is complete.
•Short position:
A trader who sells a currency expecting a decrease in value, and plans to buy it back at a lower value. Just like the "long position", short position will be closed once the trader buys back the asset for a lesser price than he/she sold it.