The world of forex trading is a global marketplace that's mean if you entered this world your chances increase to be wealthy because you can earn a lot of money from this world .
The first step in the forex :
Every business in a person's life need a plan to succeed so we will lead you to the success step by step .
Well first we will told you some terms :
○ Aggregate risk
It is the financial institution's exposure to changes in foreign currency rates .
○ foreign exchange
Currency exchange is the process of buying and selling currencies or exchanging one currency for another.
Ex :
EUR/USD
The euro against the dollar is one of the most traded currency pairs ،
○Ask price /bid price
The term "bid" refers to the highest price a buyer will pay for a specific number of shares at a specific time. The term "ask price" refers to the lowest price at which a seller can sell a stock. The bid is almost always lower than the ask price or "bid". The difference between the bid price and the ask price is called the "spread".
○ spread
The spread is the difference between the bid and ask price of a particular financial instrument, and is a major source of income for brokers, as brokers get a small percentage of the spread as a commission for their services.
Factors affecting spread size
1- The liquidity of the underlying financial instrument.
2- Current market conditions.
3- The trading volume of financial instruments.
Market volatility is caused by economic data releases or breaking news events that can cause spreads to widen
Liquidity: Lack of liquidity in the market can also lead to higher spreads. Liquidity and volatility are two interrelated concepts. Illiquid currency pairs such as emerging market currencies are notorious for their high spreads. Illiquid markets can also be the cause of volatility.
Spreads affected by the news: Spreads may widen before any important news event, such as the release of Non-Farm Payrolls.
The trading volume of a currency pair, which can also lead to large spreads if the trading volume is small .
○Bank rate
The bank rate, also called the discount rate in American English , is the rate charged by the central bank on its loans and loans to commercial banks. Discount rates vary by country and, in some countries, discount rates change over time as the mechanisms used to administer them change.
When the bank is short of money, it can usually borrow money from the central bank according to the country's monetary policy. Borrowing is often done through repos: The repo rate is the rate at which the central bank borrows money from banks against securities as collateral in the short term. It is more applicable when there is a liquidity crisis in the market. In contrast, the reverse repo rate is the rate at which banks can park excess funds with the Reserve Bank, which is most common during times of excess liquidity.
○ repo
Repurchases usually take place between commercial banks and the central bank, where commercial banks borrow money from the central bank against their holdings of bonds or treasury bills (bonds or treasury bills) and then buy them back at a higher price to provide emergency financial fluidity. It is one of the types of safe investments based on repurchases at overnight rates, often or for very short periods of time, not exceeding a week. It is a financial instrument that allows sellers to obtain liquidity from buyers. Benefits of Repos Central banks benefit from repo arrangements in times of financial crisis in markets as it helps drive markets and helps companies invest, in addition to making small profits from the minimally risky repo process.
○ yield
Yield is an indicator of the profitability and viability of your investment and is used as a unit of measure to show annual profits. Yields include types such as internal rate of return, annual rate of return, relative rate of return, current rate of return, yield to maturity (bonds), and dividends. Returns may depend on transaction type (passive/active).