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- Dianne Phuong Nguyen
Theforex market is the place where buying or selling of currencies happens. Pair is made up of two different currencies, where one is called the base currency, while the other is called the quote currency.
What is the forex market?
Have you ever heard of a dog fight? That is what the forex market is, except that the dogs are not really dogs in this pit but the different currencies.
However, the idea of foreign exchange can be when a traveller travelling from his or her home country to a different country has to get the currency changed into the fiat currency that is prevalent in the host country. While this is the basic idea, forex trading takes everything up a notch by adding many different features in the whole game.
What are the ways to earn in the forex market?
There can be various ways to earn in the forex market. The basic ways to the most complex of the. All have one thing in common, and that is buy low and sell high. Now let us look at the different ideas of trading in forex to earn money.
What is Leverage?
Most traders take leverage as a bad way and think that it is primarily the way of losing money more than rapidly, but the truth is that if used carefully, leverage can help a lot of traders to attain their financial goals much earlier than they thought it would take.
The way leverage works is very interesting. Let us assume that a broker is offering leverage of 1:500. The trader here can enter a market of five hundred dollars with just one dollar a capital. A trader can enter a market of five hundred thousand dollars with just five hundred dollars.
This is more than better for a novice since they generally have less capital, and forex is the most profitable market.
The forex market is responsible for more than six trillion dollars traded in one single day. Since the market is that liquid, there are various money-making opportunities for the traders which assure massive returns.
What are future contracts?
This is another trading strategy that can help a trader earn some quick money. A futures contract involves two parties where one party predicts that the market is either falling or rising and then make the bets accordingly. Another party that thinks that money can be made off of this deal enters the deal. Shortly, when the contract’s maturity date arrives, both parties have seen the result.
How does a futures contract work?
When a party speculates that an asset’s price will fall (the asset is a currency pair here) and another party predicts rates will rise, they enter a contract. This contract has an opening date and a closing date.
The fate of the contract is decided on the day it closes or matures. Suppose the price does fall, then the selling party is in a loss or the price rises, then the selling party is in profit. It has to be kept in mind that the asset’s price on an opening day does not matter, the price on the closing day is what matters the most, and that is how they win or lose situation is decided.
What is Trading forex in options?
Options trading is almost the same as a futures contract or trading in contract for differences. Here the trader has liberty, not a liability, to actually own the underlying asset on which the trade is conducted. In trading for CFDs or contracts for differences, the traders have to show that they have ample space for the number of assets they are betting on, just in case they actually have to store them.
For example, a trader trading CFDs in oil barrels might have to shoot if he or she has the space to hold, say, 1000 barrels of oil.
This is not the case with options trading. Here, there are two types of calls: the put and the call. The put-call means that the trader is open to selling, and the “call” means that the trader is open to buying. If a trader sees a market move that is about to move in a favourable direction, he or she makes the buy to make a profit, and when there is a chance of the market falling, traders generally look at selling their options.
Entering the forex market is relatively easy because of trading tools like leverage, margin trading, and some of the features mentioned above. But the fact is that all of these can also harm the traders in an unprecedented way. The traders are advised to sue them carefully because once the market turns on to the trade, there is nothing but chaos.
Looking up to a good broker can be of great help. One such broker is HFTrading. The broker has been around for a lot of ties and works around New Zealand and Australia.