FAQ's
Currency trading has soared in popularity this century amongst professional and non-professional traders alike. Before the arrival of the Contract for Difference (CFD) market in the late 1990s, currency trading was an asset class that was difficult for individuals to trade or invest in. Read more about forex trading here.
If you had a negative view for the Euro, perhaps because you felt that the Eurozone economy was performing poorly and was going to continue as such, you might look to short the Euro.
You might also have a view that the UK economy was looking healthy and that the short-term data was going to reflect this and beat expectations.
In this case, you would look to express your view by selling the Euro and buying the GB Pound, which would be a short position on the EURGBP currency pair.
Let’s say you sold EURGBP at 0.8500, with a target for a move down to 0.8000. You might then place a stop loss at 0.8700 in case the currency pair moved in the opposite direction.
- If the market moved down to 0.8000, you would realise a profit.
- If EURGBP moved up to 0.8700, you would be stopped out for a loss.
A forex account is a type of account that a forex trader opens with a retail forex broker. Forex accounts come in many forms, but the first that is opened is often the forex demo account.
- Breakout
This long-term strategy uses breaks as trading signals. Markets sometimes swing between support and resistance bands. Read more about breakout trading. - Moving average cross
Another Forex strategy uses the simple moving average (SMA). Moving averages are a lagging indicator that uses more historical price data than most strategies and moves more slowly than the current market price.
Other strategies include:
Bollinger band strategy
Momentum indicator forex strategy
Fibonacci strategy
MACD forex strategy
RSI indicator forex strategy
Risks every beginner should be aware of.
There are different types of risks that you should be aware of as a Forex trader. Keep the following risks in your Forex trading notes for beginners:
- Leverage Risk: Leverage in trading can have both a positive or negative impact on your trading. The higher your leverage, the larger your benefits or losses.
- Interest Rate Risk: The moment that a country’s interest rate rises, the currency could strengthen. The boost in strength can be attributed to an influx of investments in that country’s money markets since with a stronger currency, higher returns could be likely. But if the interest rate falls, the currency may weaken, which may result in more investors withdrawing their investments.
- Transaction Risk: This risk is an exchange rate risk that can be associated with the time differences between the different countries. It can take place sometime between the beginning and end of a contract. There is a chance that during the 24-hours, exchange rates will change even before settling a trade. The transaction risk increases the greater the time difference between entering and settling a contract.
Bid
The rate at which you can sell the base currency, in our case it’s the Euro, and buy the quote currency, i.e. the Japanese Yen.
Ask (or Offer)
The rate at which you can buy the base currency, in our case, the British Pound, and sell the quoted currency, i.e. the Japanese Yen.
Spreads
The difference between the Bid and the Ask prices.
Currency rate
The value of one currency expressed in terms of another. Its fluctuation depends on numerous factors including the supply and demand on the market and/or open market operations by a government or by a central bank.
Lot
Usually, the contract size is based on a lot system, and for most currency pairs 1 lot is 100,000 units of a base currency.
Pip
Minimum rate fluctuation
Account types
Pride Wealth Markets offers a variety of live and demo trading accounts, including Joint and Corporate accounts.
You can start gold trading by:
- Create a live trading account
- Choose which underlying gold market you want to trade
- Open your first position
- Monitor your trade using technical and fundamental analysis
Alternatively, read our A Beginners Guide on How to Trade Gold.
Yes, you can trade silver on MT5. Trading silver with Pride Wealth on MT5 is done by trading silver CFDs.
Contracts for difference (CFDs) allow you to speculate on the direction of the silver price without owning the metal or taking a position in stocks or funds.
In the long-term Gold prices are a matter of demand and supply, but for trading purposes, in the short-term, it’s the demand side that is most influential.
What causes the demand for Gold to rise and fall?
- Wealth protection, the flight to quality: In times of uncertainty and potentially higher risks to the global economy, investors and traders look for safe-haven financial assets to protect their portfolios. Safe-haven assets include government bonds, but Gold is often seen as the ultimate safe-haven. In times of geopolitical turmoil, when the returns on stocks, bonds, or real estate are seen to be at risk, investors and traders look to buy Gold. This triggers an increase in Gold demand and, therefore, its price.
- The value of the US Dollar: As with most global commodities, Gold is quoted and traded primarily in US Dollars. The price of Gold is, therefore, generally inversely correlated to the value of the US Dollar. All else being equal, a weaker US Dollar would support the gold price and probably drive it higher. A stronger US Dollar would tend to keep the gold price lower.
- Inflation correlation: When long-term statistics are analysed, higher levels of inflation have typically coincided with higher gold prices. This was certainly true during the period of global inflation in the 1970s, which also saw a surge in the price of Gold.
However, this correlation is not necessarily valid in the short-term and can shift over time.
There are now many different buyers and sellers participating in gold markets. The main drivers include jewellery demand, investment demand, central bank demand, and demand from technology manufacturers.
Most Gold is simply recycled from current stock, but the total supply is increasing over time. Gold is mined all over the world, with China now one of the largest producers. It is estimated that the total amount of Gold mined and above ground in 2017 was over 190K tonnes.
There are various ways to invest in physical Gold and own the precious metal. These include buying coins, ingots and bars. However, in forex, we look at how traders can access and trade Gold on a short-term timeframe.
These actions are done mainly via Exchange Traded Funds (ETFs) and Contracts for Difference (CFDs).
Similar to Gold, Silver has been a metal of value for humans from prehistory to the present day, and has been used as a form of money for thousands of years. The UK Pound Sterling takes its name from the fact that it was initially equal to one pound (lb.) of sterling silver. Silver also has historical context as a form of money and for use as jewellery, but it has far more industrial applications than Gold. These include electronics, photography, chemical equipment, and for use as a chemical catalyst.
Gold and Silver can both be traded on Pride Wealth as Contracts for Difference (CFD), and as with any trading, you’ll be looking to buy low and/ or sell high.
The decision to buy or to sell can be derived from either fundamental or technical analysis and should be part of a trading strategy that you’ve already tried and tested. Opening a demo account to refine a trading plan for gold and silver CFDs is highly recommended.
As a trader, you should have a good understanding of the influences on the bullion market you want to trade-in. You should also build a robust trading plan and set strict risk limits. You should establish an exit stop and look to constrain any losses to within predefined limits.
Bid
The rate at which you can sell the base currency, in our case it’s the Euro, and buy the quote currency, i.e the Japanese Yen.
Ask (or Offer)
The rate at which you can buy the base currency, in our case the British Pound, and sell the quoted currency, i.e. the Japanese Yen.
Spreads
The difference between the Bid and the Ask prices.
Currency rate
The value of one currency expressed in terms of another. Its fluctuation depends on numerous factors including the supply and demand on the market and/or open market operations by a government or by a central bank.
Lot
Usually, the contract size is based on a lot system, and for most currency pairs 1 lot is 100,000 units of a base currency.
Pip
Minimum rate fluctuation
Account types
Pride Wealth offer a variety of demo and live trading accounts,including Joint and Corporate accounts.
Before we can look at the specifics of indices or averages, we first need to explore the underlying financial market assets that are included in stock indices: namely stocks, shares, or equities.
Shares are a type of security defined as part ownership in a company, usually, one that is publicly listed. This gives the owner of the share an entitlement to the corporation’s earnings and assets, voting rights in major decisions about the company at the Annual General Meeting (AGM), and a dividend payment if there is one (effectively a proportion of the company’s profits).
Furthermore, if the company is run profitably and successfully, the hope is that the company’s share price will rise, and the owner of the share will make a capital gain on the value of their shareholding. Stocks and shares are primarily bought and sold on Stock Exchanges.
Averages are calculated from the prices of the selected stocks within an index (as we see below) and are used by investors as a way of gauging the performance of the different markets that the stock indices reflect. There are two main ways of calculating the value of stock indices: a price-weighted index or a capitalisation-weighted index.
Without doing a deep dive into the mathematics behind these calculations, in simple terms they differ in this way:
- A price-weighted index uses the price of the individual stocks to determine the weighting of the stock to determine the index value.
- A capitalisation-weighted index uses the value of the company to determine the weighting of the stock in the average.
The Dow Jones Industrial Average is an example of a price-weighted index. The S&P 500 a capitalisation-weighted index.
Many factors can influence the level of a stock index, but the main factors are:
Data: This includes both macroeconomic and microeconomic data.
Macroeconomic data is the major data that reflect the health of an economy or region and would include employment, inflation and Gross Domestic Product (GDP).
Microeconomic data is corporate data, which would include the usually quarterly release of company profits and revenues during earnings season. These data releases impact on an individual stock, and if the market moves are significant and/ or if the individual share has a significant weighting in an equity average, then it can have an impact on the overall index/ average.
Central Banks: Central Banks in most major economies control monetary policy, through changes to the national interest rate. Depending on how interest rates are expected to rise or fall in the future, this can impact on the whole economy by slowing or encouraging growth. That can affect individual shares and, by extension, the stock indices they form a part of.
Geopolitics: This is a broad concept which includes political, environmental, geographic and social impacts on economies and financial markets. Examples of geopolitics include trade wars (US-China trade war, 2018-2020), large political events (US elections, Brexit) and geographic events (also described as “Acts of God”) such as the Fukushima Daiichi nuclear disaster in 2011.
US – S&P 500, Dow Jones Industrial Average (DJIA), Nasdaq Composite and Nasdaq 100, Russell 2000.
Europe – FTSE 100 (UK), DAX (Germany), CAC 40 (France), EURO STOXX 50 (pan-European), FTSE MIB (Italy), IBEX 35 (Spain), SMI (Switzerland).
Asia/ Pacific – Nikkei 225 (Japan), S&P/ASX 200 (Australia), Shanghai Composite (China), Hang Seng (Hong Kong), KOSPI (South Korea), Nifty (India).
In our blog post, we explore the 10 diverse indices across industries and regions for successful trading.
Bid
The rate at which you can sell the base currency, in our case it’s the Euro, and buy the quote currency, i.e the Japanese Yen.
Ask (or Offer)
The rate at which you can buy the base currency, in our case the British Pound, and sell the quoted currency, i.e. the Japanese Yen.
Spreads
The difference between the Bid and the Ask prices.
Currency rate
The value of one currency expressed in terms of another. Its fluctuation depends on numerous factors including the supply and demand on the market and/or open market operations by a government or by a central bank.
Lot
Usually, the contract size is based on a lot system, and for most currency pairs 1 lot is 100,000 units of a base currency.
Pip
Minimum rate fluctuation
Account types
Pride Markets offer a variety of live and demo trading accounts including Joint and Corporate accounts.
MetaTrader 5 Downloads
Download the MT5 platform, and get access to your live or demo account from your desktop or mobile device.
