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For those who want to learn how to trade online efficiently, there’s no better platform than with MetaTrader 4, the one we offer here at TradeFW. That’s because MetaTrader 4 maximizes your access as well as your comfort by enabling you to connect from any device – computer, smartphone or tablet using any browser you like.

Before you start trading, however, you should familiarize yourself with a few basic terms that you’ll need to know.

What Is Forex?

Before we start, let’s define forex itself. The word is a contraction of “foreign exchange,” which is the basis of international trade. Goods and services imported into any country are valued and paid for using a currency acceptable to the party that exports them from another country. To facilitate the flow of those goods and services, most international trade is conducted using just a handful of currencies, principally the U.S., Canadian and Australian dollars, the British pound, the euro, the Swiss franc, and the Japanese yen.

The same is true with investments made by a citizen of one country using his or her own currency in the stock market of another country in which a different currency is legal tender. The two currencies have to be exchanged.

The constant exchange of one currency for another is conducted on forex exchanges. Because trade is international and the clock never stops, the forex market never closes. It’s open 24/7/365.The relative supply and demand of one currency opposite the other, known as a currency pair, is what produces fluctuations in the forex market.

Pips and Basis Points

Now let’s see how the forex market works.

Forex trading begins with the pip, which is the smallest possible difference in price that a given exchange rate can move when it is traded. This amount is also known as a single basis point. The official exchange rates of all global currencies are calculated with four digits to the right of the decimal mark.

Derivative Strategies

When you trade forex, you are engaging in spread betting, which is a type of derivative strategy. A derivative is an asset that a trader does not actually own. Instead, he or she speculates on whether the asset’s value will rise or fall over a pre-defined period of time. The exact amount of time is the spread.

Short selling is the sale of a security that the seller either does not own or has borrowed. The assumption behind short selling is that the security’s price will decline, enabling it to be bought back afterwards at a lower price in order to yield a profit.

Copy trading is the practice of copying the trades of successful, experienced traders.

Mirror trading, in comparison, is the practice of copying specific trade strategies, rather than traders themselves.

TradeFW wishes you a pleasant trading experience.