Currency Trading, Basic Things Need to Understand

If you are beginner, it is crucial that you gain some basic knowledge of this market before you risk your money. First of all you have to do home work, otherwise the consequences can be disastrous so you have to understand what FOREX is all about.

FOREX Every day, millions of trades are made in a currency exchange market called Forex. The word “FOREX” consists of two words “foreign” and “exchange”. It does not involve trading of goods but it operates through buying, selling and trading between the currencies of the various economies. Currency markets never sleep and are the biggest and the most exciting investment market.


OTC (over the counter) FOREX market is an over- the-counter market, which means trading is done directly between two parties, without any supervision of an exchange. Products traded on the exchange must be well standardized. This is necessary for there to be transparency in trading but OTC doesn’t have this limitation. The currencies are traded in different market makers:-


Inter-bank market - It is the top level foreign exchange market where bank exchange different currencies. The currencies of most developed countries have floating exchange rates and these currencies do not have fixed values .Three main constituents of interbank market are:-

•    The spot market
•    The forward market
•    SWIFT(society for world-wide interbank Financial telecommunication)

Online market makers-Retail traders can access the Forex market through online market makers. These market makers have relationship with several banks.


WORKING HOURS - The Forex market is open 24 hours a day and provides a great opportunity for trader to trade any time of the day. Currencies are traded 24 hours from Sunday afternoon(EST) to Friday afternoon(EST).

Market information - Before making any kind of investment one needs to understand the theory of market information .i.e. to know the every aspect of market so that one can use his skills to increase more profit in this competitive market. There is saying “just understand the market, it will give you best of results” means before taking any action one has to gather all the market information so that can get fruitful results.

Types of orders

• Market order- Market order is a order to buy or to sell immediately at the current market prices. These orders are used when certainty of execution is priority over price of execution. The market orders guarantees execution and has low commission as broker has minimal work to do.
• Limit order- It is an order to buy or sell currency pair. The order will be filled once the requested price is hit. Limit order cost more then market orders but these orders are beneficial because when the trade goes through, investor gets the specified purchase or sell price.
• Take profit orders- These orders automatically closes an open order when the exchange rate reaches the specify threshold. It is designed to lock the order in the position of profit. Once the price surpasses the profit taking price, the take profit becomes market order and closes the position.
• Stop loss orders- It is type of order which can help to protect from further losses. Just like take profit orders these orders automatically closes when the exchange rates turned against you and reach the level you specify. It is important to understand that these orders can restricts loses but cannot prevent losses. These orders are used to limit the losses.
• GTC (goods until cancelled) as the name suggests that these orders can never be expired and remains open until desired conditions are met or you manually cancel the order.
• GFD (good for day) as the name suggests these orders are just like GTC but will expire at the end of the business day automatically.

Spreads In the forex there are two prices for each pair a “bid price” or an “ask” price. The spreads is the difference between the bid price and the ask price or security. It is an option created by purchasing one option and by selling another option of same class but of a different series. Spread is the cost to trader but is a revenue source for the firm who executes the trade.

PIP It is a smallest price change that a give exchange rate can make. It stands for ‘performance index paper’. These are structured products helps to meet the specific requirements of a company. It is one way to hedge currency risk.


Margin It is collateral that the holder of financial instrument has to deposit to cover the risk. The collateral can be in the form of cash or securities and is deposited in margin account. A margin account allows customers to open positions with higher value then the amount of funds they have deposited in their account. If the trader loses on a position to the point equity is below the minimum requirement then margin call will result.



If you are new forex trading there are both live and demo accounts to start with. This will allow you to get a good feel of platform; how to place trades and general services are offered. There is no harm to open several accounts to understand the trading system.

To perform and to trade in forex one has to open live account. You can open three types of live accounts. One can choose to create Standard Forex Account, a Mini Forex Account, Forex Demo Account or Practice Account.

Standard Forex Account - A standard forex live account is a standard live account package which sells one lot for around 100,000 currency units.

Mini Forex Account - Mini forex account is most ideal option for beginners as this is much like the standard forex live account except that it offers single lot of 10,000 currency units.

Demo Account - The most important account you should create is Demo Account as this is the account you can use in trying out forex trading strategies before start trading with real capital. The reason why you need to use Demo Account is to help you understand the platform list without taking risk of real capital. Apart from that using Demo Account can also be considered as a tutorial for beginners. This type of Account helps to understand the theory of Forex before trading with real money and real risks.

Liteforex provides the excellent opportunity to the novice traders. Liteforex trading company supply traders lots of attractive offers for extending their total deposit value and further increase their benefits. Our range of bonuses at many levels provides user convenient and easy way at low risk and high gain.