INTRODUCTION TO FOREX

Foreign Exchange Market (Forex) is the arena where a nation's currency is exchanged for that of another at a mutually agreed rate. It was created in the 70's when international trade transitioned from fixed to floating exchange rates, and nowadays is considered to be the largest financial market in the world because of its tremendous turnover.

All currencies are traded in pairs and each is assigned with an abbreviation. Here are some of them:

Currency Abbreviations (Table 1)
EUR	Euro
USD	US Dollar
GBP	British Pound
JPY	Japanese Yen
CHF	Swiss Franc
AUD	Australian Dollar
CAD	Canadian Dollar
NZD	New Zealand Dollar
SGD	Singapore Dollar

The rate at which currencies are exchanged one for another is called the currency exchange rate. For example, "EUR/USD exchange rate is 1.2505" means that one Euro is exchanged for 1.2505 US Dollars.

The exchange rate of any currency is usually given as the Bid price (left) and the Ask price (right). The Bid price represents what will be obtained in the quote currency (US Dollar in our example) when selling one unit of the base currency (Euro in our example). The Ask price represents what has to be paid in the quote currency (US Dollar in our example) to obtain one unit of the base currency (Euro in our example). The difference between the Bid and the Ask price is referred to as the spread.

1.0 lot size for different currency pairs (Table 2)
Currency	1.0 lot size	1 pip
EURUSD	EUR 100,000	0.0001
USDCHF	USD 100,000	0.0001
GBPUSD	GBP 100,000	0.0001
USDJPY	USD 100,000	0.01
AUDUSD	AUD 100,000	0.0001
USDCAD	USD 100,000	0.0001
EURCHF	EUR 100,000	0.0001
EURJPY	EUR 100,000	0.01
EURGBP	EUR 100,000	0.0001
GBPJPY	GBP 100,000	0.01
GBPCHF	GBP 100,000	0.0001
EURCAD	EUR 100 000	0.0001
EURAUD	EUR 100 000	0.0001
NZDUSD	NZD 100,000	0.0001
USDSGD	USD 100,000	0.0001
CHFJPY	CHF 100,000	0.01

Margin:

• 1% of transaction size for account balances below $ 100,000
• 2% of transaction size for account balances up to $ 250,000
• 4% of transaction size for account balances above $ 250,000