How Forex Trading Works?

Currency trading is mainly about buy and sell activities. Currencies are traded on a price interest point (normally called pip) system. Every currency pair has their own pip value. The objective of a trader is to hold as many profitable pips as possible. Some pip values are fixed, but some can fluctuate depends on the currency gain or loses strength. Normally I trade by using margin trading, where small deposit is required to control much larger amount in the market. Here I will use 1 percent margin deposit so that $1000 control $100,000 of trade currency. $100,000 is the notional amount. Let me shows some major currency pair with the currency exchange rate and the pip values.Foreign Exchange CalculationBelow will show you how to calculate pip values.Formula is (1 pip value/currency exchange rate) x (Notional Amount)For GBP/USD, 1 pip value is 0.0001. Assume currency exchange rate is 1.7204. Notional Amount is GBP 100,000.Therefore, (0.0001/1.7204) x GBP 100,000 = GBP 0.58If we want to convert back to USD, then GBP 0.58 x 1.7204 and we will get $1For EUR/JPY, 1 pip value is 0.01 . Assume currency exchange rate is 138.96. Notional Amount is EUR100,000 . EUR/USD=1.1789Therefore, (0.01/138.96)x EUR 100,000 = EUR 7.20If we want to convert back to USD, then EUR 7.20 x 1.1789= USD8.49

What is Forex (Foreign Exchange)?

Foreign Exchange (FOREX) is the arena where a nation's currency is exchanged for that of another. The foreign exchange market is the largest financial market in the world, with the equivalent of over $1.9 trillion changing hands daily; more than three times the aggregate amount of the US Equity and Treasury markets combined. Unlike other financial markets, the Forex market has no physical location and no central exchange. It operates through a global network of banks, corporations and individuals trading one currency for another. The lack of a physical exchange enables the Forex market to operate on a 24-hour basis, spanning from one zone to another in all the major financial centers.Traditionally, retail investors' only means of gaining access to the foreign exchange market was through banks that transacted large amounts of currencies for commercial and investment purposes. Trading volume has increased rapidly over time, especially after exchange rates were allowed to float freely in 1971. Today, importers and exporters, international portfolio managers, multinational corporations, speculators, day traders, long-term holders and hedge funds all use the FOREX market to pay for goods and services, transact in financial assets or to reduce the risk of currency movements by hedging their exposure in other markets. MG Financial Group’s combination of low margin and high leverage has changed the way the Interbank currency market operates. We have done this by opening the doors of Forex to retail investors, giving them the professional tools and services needed to trade effectively in an independent atmosphere.MG Financial Group, now operating in over 100 countries, serves all manner of clients, comprising speculators and strategic traders. Whether it’s day-traders looking for short-term gains, or fund managers wanting to hedge their non-US assets, MG's DealStation™ allows them to participate in FOREX trading by providing a combination of live quotes, Real-Time charts, and news and analysis that attracts traders with an orientation towards fundamental and/or technical analysis.