Profits in Forex trading are rarely measured in dollar amounts, but are instead presented as a percentage of the deposit, with subjective assessment factors in play. 1% profit a day may be worth very little to a novice with a small deposit, but it can mean millions to a leading world banker. Other factors that determine the profits are the number of lots traded daily and leverage, which raises the risk of investment. Here are some ways to maximize your profit margins in Forex trading.
Currency pairs are traded in increments of 10,000 units. Currency pairs are arranged in pairs, with the base currency quoted in terms of the counter currency. For example, EUR/USD represents the European Union’s euro versus the U.S. dollar. However, there are risks associated with trading obscure currency pairs. If the value of your income falls due to the decline of the euro, you can sell euros for a higher price. This strategy is called currency hedge trading.
Keeping track of the latest economic news and events is a critical part of forex trading. You can start by studying the 8 major currencies (called Forex Majors) – namely, US dollar, German DM, UK pound, Japanese Yen, and Japanese Yen. Pay special attention to interest rate decisions and recent economic releases. Then, you can enter a buying order for your favorite currency pair and watch your profits skyrocket!
In forex trading, you can enter a position based on the exchange rate, with long positions being taken when the base currency increases, and short positions for when it falls. A pip represents the smallest change in the exchange rate, and is 0.0001 for most currency pairs. A standardized lot size is 100,000 units, but you can also trade micro or mini lots of currency. You can also use a futures contract, which is a standardized type of forex derivative and can be traded on an exchange.