In this article of Forex Basic Terms we will explain trading rules in Forex currency market, the concept of a deal, spread, and why should traders use spread?
Forex Basic Terms part three
Trading Rules in Forex Currency Market:
One of Forex Basic Terms is trading rules. If you trade with a certin product, and you think that its price will rise in the future, you will buy it. But; if you think that its price will fall in the future, you will sell it. In forex currency trading market; if you expect that currency price will rise in the future, you will buy it. If you expect its fall in the future, you will sell it. We should know an important principle; the size of profit or loss is depended on the size of a deal. The more the deal increases, the more you can make profit, but with more risk. The more the deal decreases, the more the profit decreases, but with less risk.
The concept of a Deal:
In order to complete a deal, must have buying and selling items. If the process of buying and selling aren’t complete, so the deal will not be complete, regardless of profit or loss.
So, we should know an important rule that profit or loss depends on the completion of the deal. we know from this that the opening of a deal is the beginning of a transaction, the open deal is a transaction that hasn’t finished yet, the close deal is a transaction which has completed the process of buying and selling.
Financial Rise or the Principle of Benefit ( spread )
Forex companies sometimes allow you to carry out more large transaction than the existing amounts in your account up to more than 200 times of the amount you have in your account to invest.
For example, if you have 1000 U.S dollar in your account, and you want to make a deal of a pair of euro/ U. S dollar with 100 thousands euro. You should make a contact with the company or give an order by the computer which is available 24 hours/ a day.
Now we should ask a question: Should you use financial rise principle? The answer is up to you and to your point of view in investment.
The most important question: Why Forex companies allow us to use financial rise or profit principle?
The answer is so simple. It is better for the company to carry out a deal with million U.S dollar instead of a deal with 10 thousand euro, because the company take 300$ as a commission instead of 3$.
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