Trading FX

Learn to Trade

SIG Trading prides itself on the overall trading experience we provide to our clients worldwide. From getting started to giving clients up-to-minute news and analysis, we're here to provide a full product suite to meet all your trading needs. The below links will provide those new to trading, the essential basics to the forex market and how it works.

Getting Started with Forex
 

The basic concept of FX trading is similar to most investment strategies; buy a currency when it is low and then sell for a profit when it is worth more. You buy one currency with another, therefore exchanging your starting currency for one which you believe will increase in value.

Once you understand and can answer the question ‘what is FX trading?’ you should be ready to begin investing in currencies. Still, you may know what forex means but be unsure about entering the FX market. There are various reasons to consider trading forex:

  • Largest, most liquid market in the world

  • Trading opportunities 24 hours a weekday

  • Only need to focus on one or two currency pairs

  • Commission free trading with low cost spreads

  • 1:300 leverage available

 

Basic of Forex Trading

Forex trading is in essence trading currencies for one another. As such, a tarder sells one currency against another at a current market rate.

In order to be able to trade, it is required to open an account and hold currency A and then exchange currency A for currency B either for a long term or a short-term trade, with the ultimate goal varying accordingly.

Since FX trading is performed on currency pairs (i.e. the quotation of the relative value of one currency unit against another currency unit), in which the first currency is the so-called base currency, while the second currency is called the quote currency.

For example, the quotation EUR/USD 1.2345 is the price of the euro expressed in US dollars, which means that 1 euro equals 1.2345 US dollars.

Currency trading can be carried out 24 hours a day, from 22.00 GMT on Sunday until 22.00 GMT on Friday, with currencies traded among the major financial centers of London, New York, Tokyo, Zürich, Frankfurt, Paris, Sydney, Singapore and Hong Kong.

Influences on the Price of the Markets

There is an endless number of factors that all contribute and influence the prices in forex trading (i.e. currency rates) daily, but it could be safe to say that there are 6 major factors which contribute the most and are more or less the main driving forces for forex trading price fluctuation:

  • 1. Differentials in inflation

  • 2. Differentials in interest rates

  • 3. Current account deficits

  • 4. Public debt

  • 5. Terms of trade

  • 6. Political and economic stability

 

In order to best comprehend the above 6 factors, you will have to keep in mind that currencies are traded against one another. So when one falls, another one rises as the price denomination of any currency is always stated against another currency.

Trading Hours

As one major forex market closes, another one opens. According to GMT, for instance, forex trading hours move around the world like this: available in New York between 01:00 pm – 10:00 pm GMT; at 10:00 pm GMT Sydney comes online; Tokyo opens at 00:00 am and closes at 9:00 am GMT; and to complete the loop, London opens at 8:00 am and closes at 05:00 pm GMT. This enables traders and brokers worldwide, together with the participation of the central banks from all continents, to trade online 24 hours a day.

How Forex Works

Forex trading is the simultaneous buying of one currency and selling of another. These two currencies make up what is known as a "currency pair". Currencies are always traded in pairs - each currency is represented by three letters. The first two letters represent the country and the third letter identifies the currency. Forex pairs are read in the opposite direction of mathematical proportions or ratios,

For example:

EUR/USD = 1.23700

  • The currency to the left of the is called the base currency (in this example, the Euro) and the currency on the right is called the quote currency (in this example, the U.S Dollar)

  • This notation means that 1 unit of the base currency (that is, 1 Euro) is equal to 1.23700 U.S Dollars

  • You have to pay 1.23700 U.S Dollars to buy 1 Euro

  • If selling, the foreign currency exchange rate specifies how much units of the quote currency you get for selling one unit of the base currency

  • In the above example, you will receive 1.23700 U.S Dollars when you sell 1 Euro

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RISK WARNING

CFDs are leveraged products that incur a high level of risk and can result in the loss of all your capital and may therefore not be suitable for all investors. You should not risk more than you are prepared to lose and before deciding to trade, please ensure you understand the risks involved, take the level of your experience into consideration and seek independent advice if necessary. We strictly do not provide trading advice.

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