May 22 2023

Is $100 Enough for Trading Forex?
Learn to trade forex, stocks and crypto with our premium trading guides. Compare brokers, review them and do so much more!
Compare Brokers
Vs.
By Stjepan Kalinic , Updated on: Apr 07 2023.
Going long means opening a trading position where you expect the price of an asset to increase in order to profit. Going short means opening a trading position where you expect the price of an asset to decrease in order to profit.
The forex market is a specific phenomenon. Although one could argue that owning currency is like being a shareholder in a certain nation, currencies don't trade like shares. They are always compared to other currencies, trading in ratios that fluctuate according to the macroeconomic changes.
Read on to learn more about forex and how it differs from other markets.
The foreign exchange (forex) market is a global market for currency trading. It operates as a decentralized network of financial institutions around the globe, on a 24-hour basis opening with the Australian market on Monday and closing with the U.S. session on Friday.
Since currencies do not trade in absolute value, they are listed as ratios. For example, the most liquid currency pair, Euro vs. U.S dollar, is abbreviated as EUR/USD, with International Organization for Standardization (ISO) codes associated with the national currency.
The forex market rose to prominence in the 1970s, after the breakdown of the Bretton Woods fixed exchange system (gold standard). As currencies started floating, optimizing the currency exposure to facilitate foreign trade made the foreign exchange a necessity. Eventually, forex became the most significant financial market with daily volumes exceeding $7 trillion.
Retail forex trading became popular in the late 1990s, as the online forex brokers popularized high leverage, low-latency trading with a competitive cost structure due to high liquidity. Nowadays, some estimates show that retail traders account for over 5% of the daily forex market trading volume.
Going long or buying is taking a stance that something will rise over a period of time. Since currencies trade as a ratio, buying means that you are betting that one currency will get stronger against another. In the short term, this can be just due to intraday fluctuations, but this will always be driven by macroeconomic factors like interest rates or GDP projections in the long term.
Let’s say that you are expecting the U.S dollar (USD) to appreciate against the Swiss franc (CHF). The pair currently trades at 0.92. You go long USD/CHF, buying 1 lot, or 100,000 units. Now you have bought USD with CHF, expecting the value of CHF to go down so that the value of your position goes up.
In the next hour, USD/CHF appreciates to 0.92250 or 25 pips. Your profit ends up being 25 x 10.86 (USD/CHF value per pip) = $271.44
Going short or selling is expecting that the value of something will decline over time. However, selling a currency means betting that another currency will rise against it.
If you are selling Euro (EUR) against the U.S dollar, you’re expecting the U.S dollar to gain in value against it.
Consider the following example — EUR/USD is trading at 1.13, and you decide to go short and sell 1 lot (100,000 units). You're selling the euro and buying the US dollar, expecting its value to appreciate.
Eventually, the price drops to 1.12750 , and you decide to close your position, buying back the euro that you sold at a lower price. Your profit would be 25 x 10 (EUR/USD value per pip) = $250.
Broker | EUR/USD Spread |
---|---|
Dynamic - From 0 to 1.2 Pips | |
Dynamic - From 0 to 0.6 Pips | |
Dynamic - From 0 to 0.77 Pips |
Forex might be simple to learn, but it is hard to master. If you want to make money consistently, you will need to be patient and disciplined.
Here is the list of things to consider when pursuing forex trading
Although it might seem complex initially, going long or short on currencies is similar to any other market. You are speculating that the price will rise or fall in the future. Yet, currencies trade in ratios, so in this case, you are buying or selling the money itself.
Forex might be simple to understand, but it takes a long time to master. However, if you take the time to discover what suits you and implement the tips from this article, you will find yourself on the path to profitability.
Short timeframe trading involves following the price movement on a timeframe that is lower than 1 hour. Usually, it is on 5 or 15 -minutes charts. Some traders might even use 1-minute trades, despite the unavoidable market noise on those timeframes.
Short-term trading can be either with the long-term trend or against it, catching the counter-trend moves as price withdraws to the mean. There are numerous short-term trading strategies, but some of the most popular include Fibonacci retracement, moving averages, and Elliot Wave analysis.
Although there is no consensus, the short-term generally covers a period from a few minutes to as long as a few days. However, it is less than one week.
One advantage that forex has over stocks is that it has no pattern day trade rule that prevents traders with a capital lower than $25,000 to make 4 or more day trades over 5 business days using a margin account in the U.S.
May 22 2023
Learn to trade forex, stocks and crypto with our premium trading guides. Compare brokers, review them and do so much more!
May 22 2023
Forex signals are not worth it due to the fact that if anyone did develop a successful Forex Signal generator they should be using it instead of trying to monetise it by charging to provide signals.
Feb 08 2023
It is possible to be profitable while trading in forex.
Feb 02 2023
Forex pairs correlations trading involves trading with forex pairs using the correlations factor between different currency pairs
Jan 27 2023
Scalping in forex is a day trading strategy used by traders on a very small time frame, with the trade usually held for a period of minutes or even seconds
Jan 24 2023
Hedging in forex is a trade protection mechanism used by traders trading with foreign exchange currency pairs. Essentially, the trader adopts a strategy to protect the initial position he/she has opened from an opposing move in the market.
Mar 03 2022
Head and shoulders is a chart pattern that signals a potential reversal on the forex market. It is one of the most popular patterns because of its simplicity, reliability, and transparent execution rules.
Feb 23 2022
The Triangle pattern in forex trading is a time-sensitive chart pattern that shows a tightening range due to market indecisiveness.
Feb 12 2022
Fibonacci strategy in forex trading is an attempt to profit by trading from the key price levels by using the Fibonacci sequence.
Feb 11 2022
Deciding to trade forex or crypto currencies depends largely on a few important factors, including risk versus reward tolerance, a willingness to speculate and knowledge of how to trade both.