How to Trade Forex Transactions and Terms
Investment is one of the financial steps that a person can take to get a return in the future. As for several types of investments that can be done, ranging from saving, deposits, mutual funds, the stock market, crypto assets to buying other assets that have the potential to have added value in the future.
In addition to the types of investments that have been mentioned, there are other ways that you can do to get profits, namely doing buying and selling activities in the financial market or commonly called trading. To trade, you can take advantage of stock market instruments, crypto assets, and overseas replace (forex). All types of activity in the financial market are basically good. The most important thing is to understand the personal risk profile and financial goals you want to achieve in the future before doing the activity.
Of the several financial instruments that have been mentioned, it turns out that there are still many people who do not know about forex. In Indonesia, overseas replace is known as foreign exchange (forex). Get information, inspiration and perception in your e-mail. Register e-mail As the name implies, overseas replace or forex is a foreign currency exchange transaction. Globally, the amount of overseas transactions replaces greater than the stock trade. Because, various transaction needs must be done by many people, such as debt payments, exports, imports, and travel abroad.
In addition to these needs, overseas replace is also a traded asset. Forex trading, as this activity is called, has high volatility because of such rapid price fluctuations. Thus, this instrument has a high rate of return on profits and also a high risk of loss as well. Before trading, it helps you know the basic terms used in forex trading, such as the type of transaction, leverage, margin, lot, balance, pip, and price movement trends (bullish, bearish, and sideways).
1. Type of transaction
To trade, you must understand the different types of forex transactions. There are several types of transactions provided, including overseas replace spot, forward transactions, swap transactions, option transactions, and futures transactions. Specifically mentioned last, currently, many dealers provide futures transaction facilities for buying and selling forex. Broadly speaking, futures transactions or futures contracts require dealers to buy or sell a certain number of underlying assets at a price and in a certain time in the future. The price at a particular position is called the price of a futures contract. Meanwhile, the price of the reference asset at the time of delivery is called the settlement price. Then, the date in the future is called the date of submission (delivery date) or final settlement (final payment date).
2. Leverage
Leverage is a loan facility provided by a broker or dealer to a trader. Its function is to enlarge the purchasing power or capital of the dealer in a certain proportion. Leverage sizes start from 1:20, 1:50, 1:100, 1:1,000, and so on. For example, you have a capital of Rp 1 million. When using a 1:100 leverage facility, you have the ability to buy a hundred times more than your capital. So, you can make transactions up to Rp a hundred million.
3. Margin
To leverage, the dealer usually has to provide a certain amount of money as collateral to make a transaction. An easy example, if you want to use a 1:100 leverage facility, you are required to have a margin of 1 percent. In other words, you as a dealer must provide a minimum capital of 1 percent of the value of the funds you want to transact. If the dealer is unable or fails to provide the minimum amount of funds, the buying and selling account owned will be in a margin call position. When margin calls, all buying and selling positions are open and the account will be closed automatically by the system.
4. Lot dan pip
Usually, some people know the term lot from the stock market. Despite having the same name, lots on the stock market and overseas replace have different transaction numbers. On the stock market, 1 lot equals a hundred shares of a company's shares. Meanwhile, 1 standard lot on overseas replace represents 100,000 contract sizes. There is also, 1 mini lot or 0.1 standard lot representing 10,000 contract sizes. If you already understand the term lot, you also have to know the meaning of pip. Pip or issues is the smallest unit of price change in forex. Generally, pips are calculated from the four numbers behind the comma. For example, if the EUR/USD currency pair you invested in drops from 1.1645 to 1.1635, it means there is a decline of 10 pips. Illustration of bullish and bearish trends in buying and selling overseas replace.
5. Price Movement Trends
As already mentioned, buying and selling overseas replace has high volatility. The price movement trend is changing rapidly. To make it easier for dealers to make transactions, there are certain terms that describe a trend of price movements. There are three main terms that are often used, namely bullish, bearish, and sideways. Bullish is a trend of price movements that tend to rise or uptrend. Bearish is the opposite or downtrend. Meanwhile, sideways is a trend of steady or flat movement. Those are some of the terms that you must know if you want to try buying and selling forex.
After knowing the terms, your next step is to prepare cold money that is devoted to buying and selling forex. In addition, you can also learn more about overseas replace while determining a trusted dealer to trade. Choose a dealer who is authorized and has obtained permission from the Commodity Futures Trading Supervisory Agency (Bappebti) and has a separate customer fund account.