WHAT IS THE SWAP IN FOREX? HOW DOES IT AFFECT TRADING?
The transactions conducted in the forex market are trading of currencies pairs. The quotes in the forex market is often displayed with 4 decimal numbers because the discrepancies are always very small. But there is no rules regulate the quality of decimal number in quotations.
In the forex market the transaction volume is up to million dollars therefore, a small differences in buying quotes and selling quotes can make huge profits for traders. And vice versa, such a big trading amount can bring trader a considerable losses. Remember that you check for all the risks and opportunities before trading with the best forex brokers.
Trades & Key Terminology
The first Forex trading knowledge for newbies is Trades & Key Terminology. A transaction which is happening is called a position. Long position is performed when a trader hope that the currencies value will go up. In the situation that this trader sell his currencies at a higher price than the price when he bought them. At that time, his position is considered closed and the trading end.
A short position is when traders expect a decrease in currency price and want to buy them at a lower price. In the situation that a trader purchase currencies at a price less than the price he sold it before, this short position is closed. You need to know this very well before you start trading with the lowest spread forex brokers.
What is the swap in forex?
In short, the swap in forex trading is defined as an amount of money that you have to pay or you will receive at the end of a trading day. Where does this money come from? Well, when you trade with margins, your short positions will cost you money at the end of the day. On the other hand, your long positions bring you money.
Forex charts and diagrams
There are a type of forex chart which many traders like called candle-chart or Janpanese candle-chart because this kind of chart can convey lots of useful information. Low prices, high prices, the opening and closing quotes are covered in this chart. There are three important points that you must pay attention to: the open, the close and the wick. The wick show trader the distance between the high and low prices. By this way, traders can compare that the closing price and the opening price, which one is higher or lower. The full wick indicates that closing price is lower than opening prices. Otherwise, an empty wick tells traders that the closing price is higher than the opening prices.
The second forex trading knowledge for newbies is the bar chart. The bar chart display the close, open prices of currencies. The top point reveals the highest quote and the bottom indicates the lowest quote in a specific period of time. The body of the bar show the range currencies trading over time meanwhile the horizon life show the opening and the closing price. The bar chart is often used to define the reduction or extension of the currency price.
For almost traders at beginning level, a line chart is much more easily to understand. A line chart is created by connecting the closing price to the very next price of a currency pair. In overall, throughout the line patterns, a trader can get the movements of currency pair in a specific period of time.
In short, obtaining forex trading knowledge is the first and vital steps that every successful trader must take. Many learning materials are available for traders from newbies to experts. Besides, there are many trading instruments that are very useful for trader like swap in forex, pips and profits calculators, economic schedule, trading flag and currency converter.