As opposed to the centralized exchange model used for stocks, Forex is run as a decentralized over-the-counter (OTC) transaction, operating 24 hours a day, five days a week, with four major markets, namely Sydney, Tokyo, London, and New York.
The currency code usually has three letters, and the exchange rate is a pair of two currencies, such as “EUR/USD” which is the Eurodollar to the U.S. dollar. The former is the base currency and the latter is the counter currency. When the pair is traded, the base currency is used as the standard, e.g. how much USD can be exchanged for one Eurodollar.
With so many online Forex brokers offering their FX services, the cost of trading is often the primary consideration for retail investors. Investors can determine the cost of trading through spreads.
What is spread？
The “pip” in “spread” refers to the unit of currency movement in the foreign exchange market quotes. In order to accurately represent the exchange rate, almost all currency pairs are quoted in five digits. A pip is equal to 0.0001, and a pip is used as a unit for buying and selling.
As its name implies, the “spread” is the “difference in points”, that is, the difference between the bid price of the buyer and the ask price of the seller.
Spreads fluctuate with the market and are influenced by factors such as currency liquidity, transaction amount, market direction, and investment strategy, with currency liquidity having the greatest impact. Generally speaking, the higher the currency liquidity, the smaller the spread. From a traders perspective, the lower the spread the better because that is equivalent to a smaller loss and a bigger profit.
For a more detailed explanation about spreads, read this article here: https://www.wikifx.com/en/newsdetail/202206215324873095.html.
Moreover, new forex traders need to seek a reputable and established forex broker to set up their trading accounts. This is a crucial step because engaging the wrong broker could become a costly mistake. For newbies especially, you do not want to start on the wrong foot and be forced out of the game before it begins. To do this, all you need is to download the WikiFX app from Google Play/App Store or log on to www.wikifx.com.
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