Foreign Exchange (FX) or Forex works as the foundation of all capital transactions around the world, including currency trade. Economic and geopolitical events can greatly fluctuate the market value of various securities and affect the trade.
Daily transaction in the Forex market is more than $5 trillion in a day, making it one of the largest Financial markets in the world. From convenient market hours, to high liquidity and trade on margin, Forex offers numerous benefits to traders. When it comes to currency trade, they are always quoted in pairs. The value of each currency is determined by comparing it with another.
Currency quotes contain two prices: "ask" and "bid" rate. Ask rate is the price at which a market maker— the market participant or a member firm of an exchange— is willing to sell the currency pair. Bid rate is the price at which a market maker is willing to buy the currency pair. The Forex term Spread refers to the difference between bid and ask rates.
Often, the need for a margin is misunderstood by the traders as a transaction fee. Margin is a part of the trader’s account being set aside. This in turn helps the trader to trade for larger amounts using smaller deposits.
Moreover, margin and trade size are proportional, which means, as trade size increases so will the margin needs.
The Forex market changes every now and then. These changes depend on various economic and geopolitical factors. Trust Capital TC allows your trade positions to be leveraged. If you do not have proper risk management plans, then this leverage offered can have huge effects on your profits and losses. If it is a loss there is a high probability that it might even damage your financial well-being. Hence, it is very important that before you trade Forex, you should have a capital, which you are willing to lose.