Online forex demo account trading offers many opportunities to make money. You can earn an extra income by understanding it. You should understand the basics of trading before you start. The buying and selling different currencies is called forex trading. When one person buys and sells two currencies at once, it is called a forex transaction. The trading is done by pairs, such as USD/JPY or CHF/USD. Profits are only made when you sell at a higher rate and buy the product for less.

Forex Trading Overview

Forex is the largest market for trading in the world. The daily average yield is almost $2 trillion, which makes it thirty times more than all equity trading in the United States. The system is unique because trading takes place between counterparts via telephone or electronic networks. Forex trading has no central location, unlike futures or stock exchanges. Trading is conducted around the clock. The trading begins when the financial centers of Sydney start their business day. It then moves to Tokyo, London, and New York.

You must learn to read quotes before you can start trading forex. The quotes will always be listed as pairs. USD/JPY, for example: 108.3. This currency is called the “base currency” and it has constant value. This other currency is called a ‘counter.’ You would understand that in the given example, one dollar of the United States is equal to 108.3 Japanese Yuen. A quote is a great way to see the value of one currency in relation to another.

Another type of quotation is a “two-sided” quote. Sometimes, you will see a quote like EUR/USD 1.3452/1.3444, which consists of an “ask” and a “bid”. You can purchase the base currency at the “ask” price, while you can also sell it for the “bid”. Spread is the difference in the price between the bid and the ask. You can, for example, buy $1 Euro at $1.3440 and sell it at $1.3452. These differences allow currency brokers to profit and provide their services without any commissions.