FOREX DEFINITION AND TERMINOLOGY

WHAT IS FOREX?

Global foreign exchange market (Forex market) is the largest market in the world with a daily trading volume that exceeds $ 3 trillion, which is larger than the daily trading volume of all stock and bond markets in the world. The liquidity and competitive prices available in the Forex market are unprecedented. Today, with irregular performance rampant in other markets, the foreign exchange market is vastly growing, due to the investments and increasing quality of management.

WHO TRADES IN IT?

Online trading, and the spread of research and analysis on the Internet along with competitive pricing in the market helped to facilitate the entry to the Forex market, where hundreds of thousands of individual experts and novices, companies and mutual funds are able to trade in the Forex market.

WHY WOULD YOU TRADE IT?

Recently, investors from the private sector and traders and individuals interested in the Forex market are becoming more aware of its advantages which include:

  • Leverage that will help you to amplify your profits
  • The liquidity of the market and the ability to trade for 24 hours a day
  • There are no commissions, trading costs are very low
  • A lot of market dynamics which always provide opportunities for profit

And what attracts investors who like taking risk is the volatility of the foreign exchange market (Forex), which provides the opportunity to make big profits, especially when using leverage.

THE NATURE OF MARGIN TRADING

Trading in foreign currencies is usually done on the basis of margin trading system, where traders are required to deposit only a relatively small amount as collateral for open trades which are much bigger in the Forex market, In “MASDAR INV” we usually require a very low margin within 1% to 2% of the total trading volume that you want to open.

For example, in order to open a trade with a size of 1 million dollars, the investor must have a sum of 20,000 dollars as collateral in his account. As a result of this system, investor may obtain leverage of up to 50 times the initial investment, with a percentage of possible change that is around 2%, which may lead to a gain or loss amounting to 100% of the size of the deposit, which is why margin trading requires to have a good system to increase your chances of making profits in most trades.

TRADING CURRENCY AND PRICE CURRENCY

Trading requires two currencies one is to buy and one is to sell, those two currencies are called currency pairs, traders speculate the probability of the rising value of the currency against declining value of another currencies and the currency of the trade is usually the higher value currency. When you end your trade, you are buying a currency by the sale of the other and the profit or loss is evident in the difference between the amount withdrawn for the purchase of the first currency in exchange for the amount that has been gained through the sale of the second currency, the prices are usually determined in dollars. So the dollar is the price currency of the price, your earnings or losses are then calculated and add to your account.

STOP-LOSS ORDERS

There are many great opportunities as well as risks facing investors in the Forex market, as investors who are inclined to risk face daily fluctuation between profits and losses of 20% to 30%, which means a great need to stop-loss orders in negative trades.

Stop-loss orders give you the ability to specify a certain level to terminate the trading automatically to prevent any greater losses than what you want, and fortunately there are no daily limits in Forex trading as there are no limits to the trading hours, which means that you will always be able to find an opportunity to take the a good reaction to movements in major currencies in the market, it also means that there is a low probability of that losses will be greater than what you’re willing to risk.

PRECAUTIOUS STOP-LOSS ORDERS

If you’re trading using speculation, we recommend that you always place a precautious stop-loss order, as you easily can, by using the MetaTrader 4 platform, place any commands you want and you can modify them with the same ease, as the platform allows you to add three orders to each trade as you get a follow-up of the direct changes in the market, each command consists of two sub commands in the shape of (if that price has been reached, then do that order), and when the master command is executed, the two sub commands are also performed, allowing you to determine the level of profit and loss per trade, and when one conditional commands is executed, the other two are canceled.

SPREADS AND LACK OF COMMISSIONS

When you trade in the Forex market, will get a price difference between the sale price and the purchase price for all currency pairs, and when you approve the displayed prices, trading is performed directly without the need to communicate with the dealing office.

Price differences in the trades involving major currency pairs are usually in the range of one point to three points, depending on the market situation, for example:

When a pair of the U.S. dollar and the Japanese Yen, USD / JPY is at 119.40-43 level, this means that the sale of the U.S. dollar against the Japanese yen will happen at a price of 119.40, while the purchase occurs at a price of 119.43.

INSTANT TRADES AND FUTURES TRADES

While trading in the Forex market, investors get offers with the immediate price for currency pairs, and it means that if no any additional steps or changes are taken, the opening of trades at this price will be settled and terminate within two working days, but if necessary, trades can be kept opened through the prevailing rate of maturity in the next business day, and this can be done until you close the trade, and this available to do on a daily basis or on longer basis.

Investors can also swap their opened trades which go back to a few days and up to several months, depending on the time frame of the investment strategy pursued by each investor, and although the futures trades are specific by a future time, they can however be closed at any time.