Understanding Bid & Ask

A Bid is what someone is willing to pay for an asset. The Ask, or offer, is what someone is willing to accept to sell an asset. As a Forex trader, you can Buy at the Ask and Sell at the Bid.

Understanding the Forex exchange quote system is essential to Forex trading. You need to remember that the first currency listed in the symbol is the base currency, and the quote is the base currency in terms of the second currency in the symbol. Major currency pairs are EUR/USD, GBP/USD, USD/JPY, and USD/CHF.

Forex Introduction : Interbank

The term INTERBANK discussed in FX terminology simply means ‘between banks and large institutions’ where information is exchanged about the current rate at which their clients or they could buy or sell a currency. However, the term ‘Interbank’ today also means anybody who is prepared to buy or sell a currency. Interbank also implies that Forex is not traded on an exchange like equities and futures. The quoted prices for a Forex are based on information from the top banks and large institutions.

Forex Introduction : The Players

There are four primary groups that trade the Forex market:

First, the Novice or Retail Traders – these are part-time, non-professional traders who are speculating on market direction – not hedging, that is, not using these markets as part of other international business dealings.

Second, the Dealers – these are the market makers, setting prices and putting together trades.

The third group, the Institutional Traders, work in banks or government agencies. They trade huge amounts of money and the size of their trades moves the markets. These traders are often trading to settle accounts for import/export and other actual international business dealings.

Last, are the Advanced Traders. This group comprises professional full-time traders, people from all across the world, sitting in smaller investment firms, offices, or even their homes. Again, these traders are generally speculating on market direction – not hedging.

Forex Introduction : Market Overview

Forex or FX, is an abbreviation for Foreign Exchange. It is a way of trading exchange rates between two different currencies. Basically, you buy one currency and sell the other for the purpose of investment speculation. The goal is to make a profit when the value or exchange rates of the currencies traded move in your favor.

Forex has more daily volume than any other market in the world. Taking place in the major financial institutions across the globe, the Forex market is open 24 hours a day. Over 90% of all currencies are traded against the US Dollar (USD). The next most-traded currencies are the Euro (EUR), Japanese Yen (JPY), Pound Sterling (GBP) and Swiss Franc (CHF).