forex

An article explains a basic understanding of FOREX trading and how to do it using a computer software.
Instructions
Step1The step 1 explains the notion behind the FOREX trading by defining certian concepts and terms.The foreign exchange trading is always done in terms of quotes and understanding these quotes might not be very easy in the first place. In order to get a hold on the foreign exchange quotes, a person needs to remember two things [4] i.e.a) ''The currency listed first in the quote is the base currency andb) The base currency has always the value 1.''For instance, GBP/JPY has the base currency as GBP. The quotes are generally expressed in terms of pair currencies e.g. if quote states that GBP/JPY is equal to value 221.91 that means 1 GBP values to 221.91 Japanese yen. So, if this value increases then GBP has appreciated in value in comparison to Japanese yen. The prices in these quotes are expressed in terms of pips which stand for “percentage in points”. These are basically the fourth decimal point i.e. 1/100th of 1%. The example of a quote which involves 10pips increase could be USD/CAD = 1.1355/1.1365 (note the last two digits). In this case, an increase in pips means weakening of Canadian dollar. As per [2], ''the smallest move that a currency pair can make is one basis point or 0.00001.''The quotes also use two important terms known as bid and ask which makes it as a two-sided quote. ''The bid is the price at which the base currency can be sold simultaneously buying the counter currency. The ask is the price at which the base currency can be bought at the same time selling the counter currency'' [2].
Step2The second step describes the powerful features of the FOREX trading system.The leverage & margin are the major features helpful in drawing the attention of the traders because these increase the buying power of the traders. ''The leverage allows the trader to expect high returns on investment (ROI) on even small market movements and it also utilizes less money to trade'' [4].On the other hand, margin in forex allows the investor not to pay any interest to the amount lender on the amount borrowed for the trade. In forex, margin is the minimum amount needed to place the trade. This can be the initial amount with which the forex trading account was opened.The example below helps in explaining the concept in detail:-Supposedly,The balance in the account (trader’s) is = $10000 and the US dollar measured to be as undervalued against the JPY. Now, to place a trade investor has to buy USD by selling JPY and wait till the rate increases. Assuming the current bid/ask price for USD/JPY = 119.30/119.40. This means that the trader can buy $1 US for 119.40 JPY and/or sell it at 119.30 JPY. On leverage 100:1 or 1%, the trader starts buying a lot of 100, 000 USD for 119, 4000 JPY which means that the initial margin deposit for this trade would be = $1000 USD. As expected, the rate now increases by 30 pips making USD/JPY = 119.60/70. The deal is closed by selling the US Dollars at the rate of 119.60 JPY yielding 119, 6000 JPY thus making a total