Facts about Currency Trading That all Should Know

Share market and forex trading is a great way of increasing your assets in a short span of time but there are various risk factors associated with it. The investors as well as the brokers have a lot of learn and master about the currency trades. There are different types of trades which you can conduct in Forex market and there are certain things which you should know in order to learn the most about this kind of trades. The following facts about forex should be learned in order to understand the working of this market and get profit accordingly.

Currency Trading
Currency Trading

How it differs?

Currency trading does not happen in regulated exchanges which are a major difference between currency trading and other forex services like stocks, futures and options. There is no central governing body that controls this particular trade. The members of the trade work with each other essentially based on the credit agreements. There is an ad-hoc arrangement associated with the currency trading unlike other trades. This is the most fluid and largest liquid market in the world and the trading is going on twenty four hours a day.

Commission in forex trading

Usually the investors who trade in stocks, futures and options often go for the services of a broker and they act as the agent for conducting all the transactions. The broker usually takes the order of the customer to an exchange and then attempt to execute it according to the instructions of the customer. In return the broker for the forex trading gets an amount of commission which is a percentage of the amount that is invested and the profit earned from it.

Know about PIP

PIP or the percentage in point is the smallest increment of trade in Forex. You can easily learn about PIP in currency exchange by consulting your broker. The basic concept of PIP is that the change in the fourth decimal point in a price is called 1 pip and it is 1/100th of a percent. However the Japanese yen is exception to this rule. One Japanese yen has the worth of $0/01 USD in the contemporary times. By these calculations, in case of USD/JPY pair the quotation is taken out of the two decimal points only unlike any other major currencies in this trade. The PIP is a very basic factor about forex transactions which you would have a clear idea about.

Leave a Reply

Your email address will not be published. Required fields are marked *