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What is buying and selling in Forex?

by on April 15, 2019 in Business, Latest News, Lead Article, News you can use, Nuggets, Rock 'n Roll

What is buying and selling in Forex?

Forex is an international financial market founded in 1976. There is an interbank exchange of different currencies at free prices. Quotes are formed without restrictions and fixed values.

Forex participants are not only private traders. Central banks of different countries, commercial financial organizations, as well as various investment and other funds, make profitable transactions here.

To date, traders earn a profit in the Forex market on the difference in exchange rates. By entering speculative transactions, they can count on a fairly large income.

The principle is simple – Forex trading is carried out with currency pairs which the trader chooses independently.

One currency acts as a commodity, and the other is considered as a means of payment. The main task of a market participant is to buy cheaper and to sell at a more expensive price.

Transactions can be made in both directions: to buy a currency at the time of its drawdown, and to sell some time after the growth; to exchange currency when its price is at its maximum levels, to buy it after reducing if there is a prospect of further growth and so on.

Buying and selling on Forex are carried out through transactions. When a trader makes a deal, this process is called the position/order opening. For example, a trader has bought the Japanese yen for the US dollar.

Then the trader expects market changes. When the price of one of the currencies of the pair being traded is changed to the maximum allowable limit, he closes the position. The result will be a profit or a loss.

Let’s take a closer look at the process of concluding a Forex transaction

1st step

The basic principle of trading is to change the price of a trading instrument (currency): if a currency rises in price, it must be bought, and if it falls, it must be sold.

Therefore, the first step in concluding a deal will be to choose an instrument with which you will work in the future. All these options are made at Forex broker, for instance, JustForex.

2nd step

After analyzing the market, predicting its behavior in the future and deciding to open a position for the chosen currency pair, the trader needs to open a new order. This can be done in several ways: by double-clicking on the currency pair, pressing the “New Order” button on the quick access panel or in the “Service” tab menu and pressing the “F9” button.

In the window that opens, the trader indicates all the parameters of the future order:

The volume of the transaction in lots, the levels of “stop loss” and “take profit” (it is recommended not to perform trading operations without setting a stop loss level, because thus the trader limits his risks), the type of order (immediate execution or pending order) and, if necessary, the level of maximum deviation from the requested price.

After checking all the data, one should click on the Buy or Sell button depending on the forecast.

For example, a trader has decided to sell a currency. After clicking the “Buy” button, a completed request is sent to the server, on which the parameters of the transaction are checked and the transaction is registered. After that, the order is immediately reflected in the “Trade” tab of the trading platform.

3rd step

Then the position must be closed with a profit or a loss. For each transaction, only its current result is reflected in the trading terminal, which constantly changes depending on the change in quotations of the traded currency pair.

Therefore, in order for the profit or loss from the transaction to take place and reflect on the deposit of the trader, it is necessary to close the position. Only then the result will be credited to the account of the trader. To fix the result of the transaction, it must be closed.

There are two ways to close a Forex transaction.

The first is automatic closing when Stop loss or Take profit levels are reached. In this case, the trader does not need to do anything, the transaction will be closed on its own. The second is to close the deal manually in the terminal.

Done! Now you know what is buying and selling on Forex and how to carry out these processes. Try Demo trading if you need some practice. It’s free of charge generally.


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