All the concepts of Forex you need to know

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Introduction

Foreign currency exchange may not be that simple as you think. They look simple because there are many steps, concepts, and procedures in it. These concepts and process will make the currency exchange a Simple concept. You can convert from any currency to any other currency. For example, USD to INR, Pound to dollars, AUD to CAD etc. You can buy and sell them depending on their value at the market to make a profit.

FFMC and the RMC

You can become an AMC or the authorized money changes. You will become complete fully-fledged moneychangers or FFMC. If you want, you can become restricted moneychangers or RMC. FFMC will become authorized persons to purchase and sell currency from locals as well as from foreigners. RMC can only purchase the currency from locals and foreigners but they cannot sell them.

Local or the residents

Different countries have different rules when it comes to the residents. Overall, a resident can be the person who resides in the country or a person from the same country but living in the different country for work. If the person wants, he can choose the country for the transaction in that financial year.

Who can trade in Forex Markets?

Two peoples can trade in Forex

  1. Hedgers

Companies like exporters, importers, governments, investors and other people who have foreign exchange permit. It depends on the exchange of different kinds of goods and its services

  1. Speculators

They are banks, financial firms, funds, corporations, certified groups, individuals who other people of affiliation. They can make a profit by using the foreign currency exchange when the currency values fluctuate.

Currency pairs

These are a simple pair of currencies in which two currencies are selected as a pair for the transaction. They can be USD TO INR, EUR TO USD, and JPY TO GBP etc. Here “TO” is bidirectional. The transaction can be done from both sides.

Buy and then sell or bid and ask

When you have currency pair, you will have two options. A smaller value of numerical then the second value near to it. For example JPY/GBP, 1.2770, 1.2776. Here the first numerical value of the bid or sell. The second numerical value is the ASK, BUY or not OFFER.

The SELL OR BID represents very price, where you can sell your major currency value and buy the secondary currency.

Profit and loss or the P&L term

This will simply show the amount of profit you had after the transaction is done. If you have, a loss then it will the loss. It is always represented in USD.

PIP

It is a value used to represent the value of currency conversion or transaction. The value includes decimal points as well. It represents the relationship between the two currencies. You can check the value of one PIP of different currency exchange. To calculate the final value of PIP, you need to multiply it by the exchange rate.

Stops, orders, and limits

A market order is a value, which represents the deal or not the market rate of exchange when a person enters the foreign currency exchange at the FOREX.  You can even give the future values on the FOREX market. This is called as STOP. Many people call it stop loss or limit. Here you can carry out different combinations of ordering. However, sometimes it is difficult to execute the orders. It is because of the volatility of the FX market.

OCO

One cancels the other or OCO is implemented when there is an open order. To do that you need to set an order limit. When someone hits the order limit. The trade will host the position of close. You will have a loss if the limit orders are to hit. You will have a profit if the stop order is to hit. When the overall trade is closed then automatically, there will be a cancellation of the remaining order.

I/DS or if done

When there is an OCO is placed, you can spin this on the ICO in the existing trade. However, you need to place this place this on a transaction or a trade, which is not exercised yet. Then if the done order can also give one-stop order attached to them.

TRAILING STOPS

The trailing stop is a useful concept for everyone. This is considered as the active loss stop, which will keep a predefined distance from the present market value. It will keep on updating depending on the market. People use it in the moving market, which is moving in a direction of trader’s wish. Here, traders’ wishes to go give a guarantee on the profit.

Hedging trades

It is a trade, which moves in the direction, which is opposite to the market trade or an open position.

Rollovers

When you have a position and the business day ends. Then all the positions you have will be rolled over to the next business day. Generally, in FOREX market trade positions are executed in two working or business days.