Here's our forex trading wiki for beginners to learn how to trade Forex on IQ Option. The foreign exchange market, called also forex or the FX, is the largest financial market in the world. It is the most liquid one as well. High volatility creates more opportunities for trading. Today I am going to explain how to trade forex on the IQ Option platform. The base for the FX is purchasing one currency for another. The main task is to speculate on the future price of the asset and buy or sell currencies accordingly.
- 1 What is the forex market cap?
- 2 How do forex markets work on IQ Option?
- 3 The quotes on IQ Option
- 4 How to use leverage on forex? A multiplier
- 5 Stop Loss and Take Profit orders. Auto-closing
- 6 Forex volatility
- 7 4 Most influential factors in forex trading
- 8 Summary
What is the forex market cap?
The capitalisation of the foreign exchange market is always a noisy topic, as huge numbers are involved in this discussion. The Bank for International Settlements provides the most comprehensive data in this regard in its reports. The latest report issued is from 2019. Daily trading volume on forex reaches $6.6 trillion. In comparison, a daily volume for the NYSE or LSE is at least several hundred times smaller.
You get the chance to place a deal on the forex market 24 hours a day, 5 days a week (or even 7 with OTC Forex instruments on IQ Option). The market opens at 0:00 GMT Monday and closes at 21:00 GMT Friday.
How do forex markets work on IQ Option?
You trade national currencies on the forex market. They are arranged in pairs so you know exactly which currency you will need to sell in order to buy another one.
IQ Option offers a variety of different countries currencies. Most commonly traded are the Euro, the US dollar, the British pound, the Australian dollar, and the Japanese yen. The US dollar has managed to retain its status as the dominant currency, staying on one side of 88% of all transactions.
To see all the available currency pairs (of which there are 41), log in to your IQ Option account and click on the plus icon in the top left corner of the platform. Then, choose Forex and the list of the assets will be displayed.
The quotes on IQ Option
In creating our little forex trading wiki, we should mention currency pair quotes. The currency quotes are the latest prices agreed between buyers and sellers. There are two prices in a quote; Ask and Bid. The ask determines the price at which the instrument is purchased, and the bid specifies the price at which the asset is sold to others. When you calculate the difference between the ask and the bid prices, you will get a spread. It is a commission that the broker charges to perform a transaction.
The IQ Option platform offers you the possibility to check the ask/bid prices at all times. You just have to mark such an option in the settings.
How to use leverage on forex? A multiplier
The movements of the prices are not very high on a daily scale. They are usually in the range of 1% only. This does not promise spectacular profits. However, there is a tool you can use on IQ Option which increases the potential earnings. It is called a multiplier.
The multiplier is a marvellous feature that has to be used with care. You ought to be aware of the fact, that it multiplies not only wins but losses as well.
Decide on the amount you wish to invest in a trade and then choose a suitable multiplier. In the example below, the invested amount is $100 and the multiplier x1000. This means that the order will be carried out as there was $100,000 in the game.
The volume of your order, as well as pip value, will be displayed on the right side of the trading interface.
Stop Loss and Take Profit orders. Auto-closing
You have chosen the invested amount and a multiplier. You have decided whether you are buying or selling. What now? I have some good news. You do not have to sit at the computer desk all day long to follow the price fluctuations and catch the best moment to end a transaction. There is a possibility on the IQ Option platform to set auto-closing for your position.
To place auto close you will have to enter two values. One is called a stop loss and the other take profit. The stop loss specifies the amount of the loss you can agree on before the transaction will be closed. The take profit defined the level after reaching which, the position will be automatically closed.
As I have already mentioned, the forex market is extremely volatile. What stands behind price fluctuations is the law of demand and supply. When the demand for a specific currency increases, the price will rise. And when the supply grows, the currency's price will fall.
There are many factors that influence the demand and supply of currencies. It can be, among others, inflation, the political situation, the economic conditions, the country's central bank monetary policy, economic reports on the GDP changes or unemployment. Moreover, unique events for example Brexit also affect the exchange rates.
4 Most influential factors in forex trading
Traders have to consider quite a lot of things so that they get the best possible results in forex trading. It does not really matter, whether you are at the beginning of the trading journey or you are more advanced. There is always a great deal to do. Some things are more complicated than others. But sometimes they just sound so complex. We want to make it simpler for you. There are 4 factors that influence iqforex a lot.
Important factors in forex trading
Forex attracts many investors. It is in fact one of the biggest markets. At the start, it may seem complicated with all currency pairs that exist. And as it is important to know what influence the market, it is not always necessary to dig deep into it. Below, you will find 4 of the most influential factors described in a simple way.
Central banks determine the interest rate for the country. For example, the U.S. Federal Reserve Bank set the interest rates for the United States. This is a little bit simplified, but you do not need all the details of how it works. It is enough to know that these interest rates are charged by banks when they borrow money from another bank and can significantly influence the market. Inflation is reduced when interest rates are higher. And business activity rises when they are lower.
IQ Option offers an economic calendar where you can follow important news releases. Beware of references to changes in interest rates as they will most probably affect the currency of this specific country.
The general economic situation of the country is very important when it comes to the value of its currency. A stable or growing economy allows putting more money in circulation, buying more services and goods.
This is why you should also follow the economic reports. They are often made yearly, quarterly or monthly even. Take note of GDP (Gross Domestic Product) reports.
Political and military conflicts
Political and military conflicts affect a global economy and so they have an impact on the situation in the markets. Sometimes you may think that upheaval in a small country that you have never heard of will not influence other countries economy. But today's world is very much connected. Even political changes in a tiny part of the globe can lead to big changes in the other corner of the world.
Let me give you an example. Myanmar is a small country however, it is a net exporter of natural gas to China. If the energy costs increase, the prices in the market will rise.
So observe what is going on in the world and find out how it can affect your trading.
Technical and fundamental analysis
Both, technical and fundamental analysis are of great importance in forex trading. Technical analysis is based on the evaluation of the price charts for a specific currency. Fundamental analysis requires you to know what is going on in the economic and political world (pretty much what was described in the 3 points above).
It is a good idea to focus on one or just a few currency pairs and get to know them well. The most popular pair among the traders is the EURUSD currency pair. With time, you will become able to spot the repeatable patterns and the way the market reacts to news releases.
The forex market gives tremendous opportunities to earn profits trading. It is not only the largest financial market but besides the most liquid one. There is, naturally, a relatively high risk involved in trading on FX. This is why you should be well prepared. Forex trading for beginners can be difficult.
Learn about the foreign exchange market. Then, use the IQ Option free demo account to trade on the forex market. Over time you will learn the rules of forex trading and you will be able to invest real money in the IQ Option live account.
Check the economic calendar to be up-to-date with the latest news releases. Use this information in your favour.
Do you have any suggestions, or your own insights on the forex market? Feel free to comment under our little forex trading wiki.
Wish you high profits!
General Risk Warning: The financial products offered by the company carry a high level of risk and can result in the loss of all your funds. You should never invest money that you cannot afford to lose
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