The foreign exchange (Forex) market is one of the largest and most popular financial markets in the world. According to the last triennial survey of the Bank of International Settlement (BIS), published in December 2016, the size of the forex market was $5.2 trillion per day. BIS collects data from 1,300 banks and dealers from 52 countries across the world.
There are no centralized trading locations for the forex market. Forex is an over-the-counter (OTC) market with currencies being traded in various financial centers globally, such as New York, Frankfurt, London and Tokyo. The forex market is a 24-hour open market that closes during weekends. The market is split in three major trading sessions, the European, the Asian and the United States (US) one. This means that traders are able to execute their strategies at any time of the day, regardless of the location they live in or in which time zone they are.
What is forex trading
In the past people were used to trading currencies when they wanted to buy merchandise from other countries or when they were travelling abroad for leisure purposes. Technological innovations in the last twenty years such as the Internet and mobile devices have opened the forex market to retail traders. Online trading platforms and specialized trading software, based on algorithms, have enabled traders to follow forex market updates and build suitable strategies depending on their targets.
Every forex trade involves the simultaneous purchase of one currency and the sale of another. The value of a currency is a rate and is determined by its comparison to another currency. The first currency listed in a currency pair is called the base currency and the second currency is called the quote currency. The currency pair shows how much of the quote currency is needed to purchase a unit of the base currency.
Major currencies
The six most traded currencies in the world are the US Dollar (USD), the Euro (EUR), the Japanese Yen (JPY), the British Pound (GBP), the Australian Dollar (AUD) and the Swiss Franc (CHF). According to a Business Insider report published on 29th December 2016, the US Dollar is the most traded currency, taking up more than 84% of worldwide forex transactions. The Euro comes second with 39% and the Japanese Yen third with 19%. Forex traders refer to the currencies that trade the most volume against the US Dollar as the major currencies. Currency pairs that are not linked with the US Dollar are called minor currencies.
What is a Percentage in point (pip)
A “pip” stands for “percentage in point” and is a unit of measurement which expresses the change in value between two currencies. In the majority of currency pairs, a pip is the last decimal of the quotation as most pairs go out to four decimal places. However, there are exceptions such as Japanese Yen (JPY) pairs that they go out to two decimal places. Each currency has its own relative value so the trader should calculate the value of a pip for a particular currency pair, in order to know the amount of profit he gains or his losses.
STO and Forex trading
Actively trading the forex market involves various risks for the trader. An efficient risk management strategy is needed in order to avoid incuring losses as the forex market is one of the most volatile in the world. STO offers its clients over thirty currencies to choose from for a bespoke trading experience. STO provides its clients with a modern online trading platform (MT4) and a daily technical and fundamental analysis to help them form the right trading strategy.
Trading Forex and CFDs, which are leveraged products, are high risk investments and puts your capital at risk. You may sustain a loss of some or all of your invested capital. Only speculate with money you can afford to lose.
STO Review