In order to make a business out of a Forex investment, the dealer has to ask, buy, sell, and bid to manipulate the market and its conditions. The spread is what generally determines the amount of profits, or losses in a closed deal. The difference between the exchange selling and buying prices indicates the spread. The key rule is to buy low and sell high; the currency pairs.

Market-makers and platforms will provide a quote; the asking and selling price for a pair of currencies. Quotes are also known as a declaration or statement of prices. In the exchange market, there are 2 types of statements, indirect and direct. When a unit of United States money is related to another currency, it is direct.

An indirect quote is a currency priced against the United States dollar. Both statements can be obtained through various platforms. The market-maker has an obligation to honor the contract of stated prices in money. The tricky part is accepting the right declaration at the right time; it has a limited lifespan.

Unlike an assured price, an indication represents general price levels. The investor sees the current prices, but the platform is not obligated to sell at the prices indicated. Currencies are traded in pairs, to counterbalance the profit margin or loss.

The first currency in a pair is considered the base currency. The second currency in a pair is referred to as the counter currency. Very much like fractions, the base is the denominator and the counter currency is the numerator. There are 5 different methods to trade indirectly or directly; spot market, forwards and futures, options, contracts for difference, and spread betting.

Trading a currency for another represents a spot transaction. A good first step is to examine the current market prices for the spot rate. Spot transactions do not require an immediate payment or immediate settlement. The second business day after the contract is represents the value date. Study these key-terms to the fullest extent and prepare to make the best of your Forex investment and yield a profit.

Do not attempt to trade currencies without proper forex research. While reading a forex scam review will keep you away from fraudulent transactions.

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Filed under: Currency Trading

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