Are you interested in Forex? You should be. Forex, or foreign exchange, is the world’s largest financial market, worth trillions of dollars every day. Forex is as simple as exchanging currency at the local bank and can be as complex as leveraged spot trading in a margin account. The critical detail for traders and investors is that forex markets are easily accessed through digital portals, providing a vehicle to capture fluctuations in international exchange rates.
MarketBeat’s forex calculator is a tool determining potential gains and losses based on the exchange rates of commonly traded forex pairs. It tracks profits and losses in pips and can be tuned to numerous account currencies including the pound, euros, and others.
What Is Forex Trading?
Forex trading is all about exchange rates. Exchange rates are the value of one currency relative to another, which is never equal and always changing. The rates vary for numerous reasons, including monetary supply, economic health of the issuing nation, central bank policy, economic news and demand. Traders and investors make money when exchange rates move, but there is a catch. The amount of movement is usually very small, which means it can take an enormous position to make meaningful profits.
FX trading or spot forex, which is based on foreign exchange, makes it easy to capture profits in forex markets with leverage. Leveraged accounts turn small price movements into larger gains but come with increased risks. The losses can be equally large and can quickly lead to margin calls. That’s why money management and risk mitigation including stop losses and profit targets are essential tools.
Forex currencies are traded in pairs. Major currencies traded include the U.S. dollar (USD), Euro (EUR), Pound (GBP), Japanese Yen (JPY), Australian dollar (AUD) and Swiss Franc (CHF). These currencies are traded in major and minor pairs. Major pairs include the USD like the EUR/USD, USD/JPY, GBP/USD and many others. The minor pairs do not include the USD and often result in higher volatility and more opportunity for traders.
Forex trading is counted and tracked in pips, a pip is equal to 1/1000 of the underlying currency. If the EUR/USD pair is trading for 1.0562 it means that it costs 1.0562 dollars to buy one euro in U.S. dollars. An investor can buy this pair if they think the dollar will weaken and the exchange rate will increase, or sell it if they think the dollar will strengthen. Major pairs like the EUR/USD tend to make smaller daily moves but can average 50 to 60 pips per day and much larger moves when news is released. Minor pairs can move more than 100 pips per day on average.
