Welcome to Piptide Forex Blog

At Piptide, we explore foreign exchange trends through insightful articles on sentiment and technical analysis, helping traders make informed decisions in the dynamic forex market.

Our Mission

Who We Are

Our team is dedicated to providing valuable insights and analysis, fostering a community of informed traders who seek to navigate the complexities of the foreign exchange market with confidence.

What is Foreign Exchange?

Foreign exchange refers to the conversion of one currency in terms of another. Just like stocks, the value of a currency is based on the market forces of demand and supply. Similar to stock market floatation with enterprises, countries can decide to “float” their currency on the forex market. This means that the currency floats against another, and fluctuates according to the relative values of the other currencies.

Foreign exchange is vital for economic activities between countries. International trade, including imports and exports between nations involves the purchase and selling of goods in their respective currencies, which is a factor that fluctuates the value of the 2 parties’ currencies. Another such factor that influences the value of a currency is foreign direct investment (FDI), which influences the demand of a currency.

As individuals, we can choose to invest in foreign exchange markets, where currencies are bought and sold. It is traded virtually 24x7. In this market, individuals can benefit as currency values appreciate, but are made worse off when the currency depreciates. To profit from foreign exchange markets, it is crucial to study factors that influence the values of currencies.

Bibliography

1. https://www.hdfcbank.com/personal/resources/learning-centre/pay/know-what-is-foreign-exchange

2. https://www.investopedia.com/ask/answers/08/what-is-foreign-exchange.asp

The Foreign Exchange Market

The foreign exchange market or Forex market is the global market where institutions such as governments, central banks, commercial banks, firms, and even individuals indulge in the purchasing and selling of currencies. Commonly, the Dollar/Euro currency pair dominates the forex market, and the United Kingdom is the largest trading location.

The interbank market is a type of foreign exchange marketplace where currencies are traded between large privately held banks. There are monumental sums of money being traded on the interbank market, and they occur in just seconds. This type of market follows a floating exchange rate system, which indicates how market forces determine the value of currencies.

There are three types of key forex markets: Spot, Forward and Futures. The spot forex market makes up much of daily trading of currencies, as it is the market where currencies are exchanged between buyers and sellers. Its participants include dealers, brokers, speculators, and even commercial and central banks. It is considered relatively simple.

The forward forex market is a market that consists of two parties who agree to trade at a set price and quantity at some future date. The parties can lock in their exchange rates for future transactions, and can be held by firms, individuals, and even governments.

The futures forex market is similar to forward markets. However, they deviate heavily too, as they utilise centralised exchanges. A centralised exchange rate is also known as a fixed exchange rate, which is fixed by a central bank of a certain country. It is completely controlled by the central bank, and the bank purchases and sells currencies to maintain a stable value.

Bibliography

1. https://www.sciencedirect.com/topics/economics-econometrics-and-finance/foreign-exchange-market

2. https://corporatefinanceinstitute.com/resources/foreign-exchange/interbank-market/

3. https://www.investopedia.com/terms/forex/f/forex-market.asp

How to Forex Trade

To start Forex trading, it is integral to choose a reliable broker. Usually brokers regulated by authorities, such as the U.S. Commodity Futures Trading Commission. It is also imperative to make sure the broker offers reasonable fees and educational resources. Another important step is trading on a demo account; to become adapted to simulated real world market conditions.

Most Forex traders today have a trading plan that outlines their desired profit, risk management, and evaluation criteria. Rational decision making must be performed to avoid impulsive decisions. Choosing currency pairs such as EUR/USD, or GBP/USD which have high liquidity makes them ideal for beginners to trade with.

There are two types of analysis that must be performed by the trader on the Forex market: Technical and Fundamental analyses. Technical analysis includes the use of charts and indicators to make note of trends in the movement of prices. This allows the trader to potentially predict future prices. Fundamental analysis involves the monitoring of economic factors, such as interest rates, GDP, inflation, and even market news.

Monitoring trade is a vital process that allows the traders to set a target profit through the process of buying and selling. The trader can also set orders to stop loss and claim profits at desired levels. Beginners also usually trade with small amounts, like $200-$500 for mini or microaccounts

Bibliography

1. https://www.ig.com/en/forex/what-is-forex-and-how-does-it-work

2. https://www.investopedia.com/articles/forex/11/why-trade-forex.asp

3. https://www.investopedia.com/articles/stocks/09/use-stop-loss.asp

Risks of Forex Trading

Forex trading involves significant risks. It is integral to manage the risks affiliated with forex trading to not risk losing the money invested on the market. Encountering these risks are the reasons why most beginner traders quit early, and hence it is essential for beginners to understand the risks in order to continue trading.

Market volatility is a risk that fluctuates the prices rapidly in the market, and its reasons include economic data releases, geopolitical events, or market sentiment. Choosing the wrong broker can also risk profits, as the brokers defaulting places your money at significant risk.

Interest rates are controlled by the central bank of a nation. This is part of monetary policy; a demand side policy implemented by a country’s central bank which concentrates on the issuing of money and interest rates. The changes in interest rates can impact currency values, and hence a fundamental analysis can help mitigate the risks of interest rate changes.

A common risk that is found among even experienced traders is psychological risks. Human beings are prone to making impulsive decisions that are driven by emotions like fear and even greed. This outlines the necessity of a trading plan that should be controlled by rational decision making. Greedy traders often make trades based on previous profits, which are not always the same and could risk money invested.

Noting these risks and mitigating them as beginners are crucial to ensure that trades are made successfully. Strategies for risk management affiliated with each risk can be done through rational decision making and a thorough roadmap on what to do.

Bibliography

1. https://www.investopedia.com/articles/forex/11/why-trade-forex.asp

2. https://www.investopedia.com/forex-trading-strategy-and-education-4689674

3. https://www.investopedia.com/terms/c/centralbank.asp

Bibliography

1. https://www.ig.com/en/forex/what-is-forex-and-how-does-it-work

2. https://www.investopedia.com/articles/forex/11/why-trade-forex.asp