How Forex Trading Works

Mechanics of Forex Trading:

Forex trading involves buying one currency while simultaneously selling another. Trades are executed in currency pairs (e.g., EUR/USD), where the first currency is the base currency, and the second is the quote currency.

Understanding Leverage and Margin:

• Leverage: Allows traders to control larger positions with a smaller amount of capital. For example, 1:100 leverage means you can control $100,000 with $1,000.
• Margin: The amount of money required to open a leveraged position. It acts as collateral for the trade.

Types of Forex Orders:

• Market Order: Executes immediately at the current market price.
• Limit Order: Executes at a specified price or better.
• Stop-Loss Order: Closes a position at a predetermined price to limit losses.
• Take-Profit Order: Closes a position at a specified price to secure profits.