How to Trade Forex?
Buy currencies that are going up, sell the currencies that are going down.
Reading a Quote
The first step you need to know is reading a quote, let’s take EUR/USD as an example, this currency shows you how much one euro (EUR) is worth in USD dollars (USD). If you wanted to look at the euro in terms of the British pounds (GBP), you would need to view the EUR/GBP rate.
The first currency is the base currency and the second currency is the counter currency when you buy or sell a currency pair, you are performing that action on the base currency.
What’s a pip?
The most common increment of currencies is known as the “pip.” Most currency pairs are quoted to four decimal places (0.0001 in case of EUR/USD, GBD/USD, USD/CHF and 01 in case of USD/JPY). For instance, if the EUR/USD moves from 1.2019 to 1.2020, then this represents a one pip movement. For Japanese Yen pairs, 1 pip is the second decimal place of a quotation. If USD/JPY moved from 109.105 to 109.115, then this represents a one pip movement.
How can I sell euros when I don’t have any?
You can buy or sell anything you see active on the MT4 trading platform, even if you don’t have any of that currency. When trading forex, you are staking the changes in rates, you do this by borrowing euros. This also allows you access to leverage, which can increase your profits and your losses.
For example: When you sell EUR/USD, you borrow 1,000 euros and sell them to someone else in the market, earning the equivalent in US dollars. Say you did this while the EUR/USD is at 1.2296. In that case, you borrowed 1,000 euros, sold them for $1,229.60, and held on to those US dollars.
So what’s leverage?
Leverage is the ability to trade with a large amount of money without using your own money, it pretty much means a “loan” borrowed from us. Leverage offers clients an opportunity to take risks in the market, increases the amount of real money they have in their accounts to potentially increase any profits. While leverage can be advantageous in increasing your profits, it can also significantly increase your losses when trading, so it should be used with caution.
Here is an example: If you have $5000 in your trading account and you set your leverage to 100:1, this gives you $500,000 power. If the value of your open trade moves up to $501,000, you gain 100% of the profit of $1,000. The leverage in this situation gives you the ability to earn 100 times more than the money you put down.
I don’t know what Margin is?
Margin is the deposit given to the broker by the trader. You need leverage to use margin!
A broker demands this margin so that the opened position is maintained and sustained. The amount of margin required varies from broker to broker. A trader will offer the collateral to ensure and guard that his broker is not under threat of any credit risk.
Useable margin is the funds available in the trader’s account that are optioned for opening new positions.
A margin call is a term for when a broker requests an increase maintenance margin from a trader, to keep a leveraged trade open.
How do I place a trade?
At GMT Markets we use the MT4 platform to places trades. The first step is opening an account with GMT Markets which you can apply for an account here. Once your account is approved, please download the MT4 Platform here.
Unsure on how to use MT4? Contact our friendly team on 1800 468 658 or on the live chat below.