What is Forex? A Beginners Guide

In the meantime, the GBP/USD pair remains at the mercy of the USD price dynamics in the absence of any relevant market-moving economic releases - either from the UK or the US. Nevertheless, spot prices remain on track to register gains for the second successive week. However, gapping can occur when economic data is released that comes as a surprise to markets, or when trading resumes after the weekend or a holiday. Although the forex market is closed to speculative trading over the weekend, the market is still open to central banks and related organisations.
The same raises speculations that the Dragon Nation’s central bank, namely the People’s Bank of China (PBOC), will also cut the rates. Looking ahead, China’s inflation gauges for May, namely the Consumer Price Index (CPI) and Producer Price Index (PPI), will gain major attention due to the Dragon Nation’s status as one of the biggest Gold consumers. The forecast suggests that the headline CPI will improve to 0.3% YoY in May versus 0.1% prior whereas the PPI could drop further to -4.3% YoY from -3.6% previous readings. Given the mixed outlook, the XAU/USD traders will look for any surprises. Given the downbeat US data, Gold buyers appear mostly certain of witnessing no rate hike by the US Federal Reserve (Fed) interest rate hike in the next week’s Federal Open Market Committee (FOMC) monetary policy meeting. Additionally, the disappointing statistics also reduce the market’s bets on July rate lifts and drown the US Dollar, as well as add strength to the XAU/USD run-up.
You can also trade crosses, which do not involve the USD, and exotic currency pairs which are historically less commonly traded (and relatively illiquid). A long position means a trader has bought a currency expecting its value to rise. Once the trader sells that currency back to the market (ideally for a higher price than he or she paid for it), their long position is said to be ‘closed’ and the trade is complete.
In addition to diversifying your portfolio, you can also trade forex 23 hours a day, 6 days a week, while the stock market’s hours are more limited. Non-bank foreign exchange companies offer currency exchange and international payments to private individuals and companies. Most developed countries permit the trading of derivative products (such as futures and options on futures) on their exchanges. All these developed countries already have fully convertible capital accounts. Some governments of emerging markets do not allow foreign exchange derivative products on their exchanges because they have capital controls.

This is the difference between the buy (offer) and sell (bid) prices, which are wrapped around the underlying market price. The costs for a trade are factored into these two prices, so you’ll always buy slightly higher than the market price and sell slightly below it. It’s achieved by opening positions that will stand to profit if some of your other positions decline in value – with the gains hopefully offsetting at least a portion of the losses. An example would be EUR/USD and GBP/USD, which are positively correlated because they tend to move in the same direction. So, you could go short on GBP/USD if you had a long EUR/USD position to hedge against potential market declines.
A trader can buy or sell currencies in the forward or swap markets in advance, which locks in an exchange rate. To help you know what’s happening in the forex market every day, we provide an FX Market Snapshot tool. It’s a visual guide that summarizes current market activity, allowing traders to quickly see and understand which major currencies are strong or volatile, and which currency pairs have gained or lost the most. Currency carry trade refers to the act of borrowing one currency that has a low interest rate in order to purchase another with a higher interest rate. A large difference in rates can be highly profitable for the trader, especially if high leverage is used.
Historically, these pairs were converted first into USD and then into the desired currency - but are now offered for direct exchange. Most online brokers will offer leverage to individual traders, which allows them to control a large forex position with a small deposit. It is important to remember that profits and losses are magnified when trading with leverage.
The tools and policy types used will ultimately affect the supply and demand of their currencies. A government’s use of fiscal policy through spending or taxes to grow or slow the economy may also affect exchange rates. In a long trade, the trader is betting that the currency price will increase and that they can profit from it. A short trade consists of a bet that the currency pair’s price will decrease. Traders can also use trading strategies based on technical analysis, such as breakout and moving average, to fine-tune their approach to trading.
สมัครforex The aim of technical analysis is to interpret patterns seen in charts that will help you find the right time and price level to both  enter and exit the market. As a forex trader, you’ll notice that the bid price is always higher than the ask price. For most currency pairs, a pip is the fourth decimal place, the main exception being the Japanese Yen where a pip is the second decimal place.