Net profit (NP) ratio - explanation, formula, example and ...

Forex Trading Basics Reddit - Forex Glossary Terms For Beginners

Forex Trading Basics Reddit - Forex Glossary Terms For Beginners

What is Forex - Terminology

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The FOREX market is the largest financial market in the world. On a daily basis, trillions of dollars are traded in different currencies around the world.
Being FOREX the basis for international capital transactions, its liquidity and volume are much greater than any other financial market. It is estimated that the average volume traded by the world's largest stock exchange, the New York Stock Exchange (NYSE) in a full month, is equal to the volume traded daily in the Forex currency market. In addition, it is estimated that this volume will increase by 25% annually.
80% of transactions are between the US dollar (USD), the euro (EUR), the yen (JPY), the British pound (GBP), the Swiss franc (CHF), and the Australian dollars (AUD) and Canadian (CAD).

What is traded in the Forex market?

We could just say that money. Trading in FOREX simultaneously involves buying one currency (for example euros) and selling another (for example US dollars). These simultaneous purchase and sale operations are carried out through online brokers. Operations are specified in pairs; for example the euro and the dollar (EUR / USD) or the pound sterling and the Yen (GBP / JPY).
These types of transactions can be somewhat confusing at first since nothing is being purchased physically. Basically, each currency is tied to the economy of its respective country and its value is a direct reflection of people's perception of that economy. For example, if there is a perception that the economy in Japan is going to weaken, the Yen is likely to be devalued against other currencies. In other words, people are going to sell Yen and they are going to buy currencies from countries where the economy is or will be better than Japan.
In general, the exchange of one currency for another reflects the condition of the health of the economy of that country with respect to the health of the economy of other countries.
Unlike other financial markets such as the stock market, the currency market does not have a fixed location like the largest exchanges in the world. These types of markets are known as OTC (Over The Counter). Transactions take place independently around the world, mainly over the Internet, and prices can vary from place to place.
Due to its decentralized nature, the foreign exchange market is operated 24 hours a day from Monday to Friday.
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Forex Trading Basics - Basic Forex Terminology

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As with any new skill that is learned, it is also necessary to learn its terminology. There are certain terms that you must know before you start trading Forex. Here are the main ones.

• Major and minor currencies

The 8 most widely used currencies (USD, EUR, JPY, GBP, CHF, CAD, NZD, and AUD) are known as “ major currencies ”. All other currencies are called " minor currencies ." You don't need to worry about minor currencies, as you probably won't start trading them for now. The USD, EUR, JPY, GBP, and CHF currencies are the most popular and most liquid currencies on the market.

• Base currency

The base currency is the first currency in any currency pair. It shows how much the base currency is worth against the second currency. For example, if the USD / CHF has a rate of 1.6350, it means that 1 USD is worth 1.6350 CHF. In the forex market, the US dollar is in many cases the base currency to make quotes, the quotes are expressed in units of $ 1 on the other currency of the pair.
In some other pairs, the base currency is the British pound, the euro, the Australian dollar, or the New Zealand dollar.

• Quoted currency

The quote currency is the second currency in the currency pair. This is often referred to as a "pip-currency" and any unrealized gains or losses are expressed in this currency.

• Pip

A pip is the smallest unit of the price of any currency. Almost all currencies consist of 5 significant digits and most pairs have the decimal point immediately after the first digit. For example EUR / USD = 1.2538, in this case, a pip is the smallest change in the fourth decimal space, which is, 0.0001.
A notable exception is the USD / JPY pair where the pip equals $ 0.01.

• Purchase price (bid)

The buying price (bid) is the price at which the market is ready to buy a specific currency in the Forex market. At this price, one can sell the base currency. The purchase price is displayed on the left side.
For example, in GBP / USD = 1.88112 / 15, the selling price is 1.8812. This means that you can sell a GPB for $ 1.8812.

• Sale Price (ask)

The asking price is the price at which the market is ready to sell a specific currency pair in the Forex market. At this price, you can buy the base currency. The sale price is displayed on the right-hand side.
For example, at EUR / USD = 1.2812 / 15, the selling price here is 1.2815. This means that you can buy one euro for $ 1.2815. The selling price is also called the bid price.

• Spread

All Forex quotes include two prices, the bid (offer) and the ask (demand).
The bid is the price at which the broker is willing to buy the base currency in exchange for the quoted currency. This means that the bid is the price at which you can sell.
The ask is the price at which the broker is willing to sell the base currency in exchange for the quoted currency. This means that the ask is the price at which you will buy. The difference between the bid and the ask is popularly known as the spread and is the consideration that the online broker receives for its services.

• Transaction costs

The transaction cost, which could be said to be the same as the Spread, is calculated as: Transaction Cost = Ask - Bid. It is the number of pips that are paid when opening a position. The final amount also depends on the size of the operation.
It is important to note that depending on the broker and the volatility, the difference between the ask and the bid can increase, making it more expensive to open a trade. This generally happens when there is a lot of volatility and little liquidity, as happens during the announcement of some relevant economic data.

• Cross currency

A cross-currency is any pair where one of the currencies is the US dollar (USD). These pairs show an erratic price behavior when the operator opens two operations in US dollars. For example, opening a long trade to buy EUR / GPB is equivalent to buying EUR / USD and selling GPB / USD. Cross-currency pairs generally carry a higher transaction cost.

• Margin

When you open a new account margin with a Forex broker, you must deposit a minimum amount of money to your broker. This minimum varies depending on each broker and can be as low as € / $ 100 at higher amounts.
Each time a new trade is executed a percentage of your account margin balance will be the initial margin required for a new trade based on the underlying currency pair, current price, and the number of units (or lots) of the trade. .
For example, let's say you open a mini account which gives you a leverage of 1: 200 or a margin of 0.5%. Mini accounts work with mini lots. Suppose a mini lot equals $ 10,000. If you are about to open a mini lot, instead of having to invest $ 10,000, you will only need $ 50 ($ 10,000 x 0.5% = $ 50).

• Leverage

Leverage is the ratio of the capital used in a transaction to the required deposit. It is the ability to control large amounts of dollars with relatively less capital. Leverage varies drastically depending on the broker, it can go from 1: 2 to even 1: 2000. The most common level of leverage in Forex can currently be around 1: 200.

• Margin + leverage = dangerous combination

Trading currencies on margin allows you to increase your buying power. This means that if you have $ 5,000 in account margin that allows you a 1: 100 leverage, you can then buy $ 500,000 in foreign exchange as you only have to invest a percentage of the purchase price. Another way of saying this is that you have $ 500,000 in purchasing power.
With more purchasing power you can greatly increase your potential profits without an outlay of cash. But be careful, working with a high margin increases your profits but also your losses if the trade does not progress in your favor.
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4 Types of Indicators that FX Traders Must Know Investopedia - YouTube What is a market order  Investopedia Academy Investopedia - YouTube

Capital Loss Coverage Ratio . The difference between an asset’s book value and the amount received … Gross Cash Recovery (GCR) The gross cash colloctions expected over the remaining life of … Initial Targeted Cash Value . The gross amount of collections expected to be obtained through … Liquidation Differential . The loss in value of an asset after it has been placed in receivership ... Now that you know how forex is traded, it’s time to learn how to calculate your profits and losses. When you close out a trade, take the price (exchange rate) when selling the base currency and subtract the price when buying the base currency, then multiply the difference by the transaction size. That will give you your profit or loss. Price (exchange rate) when selling the base currency ... Net profit ratio (NP ratio) ... What does a net loss percentage ratio means? Eg. if total net loss is 2,613,360 and total sales is 8,033,786. How would you interpret the results and what could be the possible cause? Thanks in advance for your assistance. Reply. Ajay . Banks have different format of b/s & p&l a/c… how to calculate the 1)Gross Profit Ratio 2) Net Profit Ratio and 3)Fixed ... Burke ratio (BR) The Burke ratio (BR) is a drawdown-based measure of risk-adjusted performance. The measure was first proposed by Burke in 1994 in a paper with the title Burke (1994) “A sharper Sharpe ratio”. To calculate the BR, we should first be able to calculate the drawdown of an investment. We discuss how to calculate the drawdowns on the page drawdown. I'm a 19 year old uni student, currently studying quite a bit of mathematics and weirdly enough majoring in Physiology, and was introduced to trading at 15, I used to "trade" with my dad back then, however he was trading with a market maker at the time and he copped a net $30000 loss. I have had a successful history paper trading since , and 3 months ago decided to tackle trading with real ... The blanket advice of having a profit/loss ratio of at least 2:1 or 3:1 per trade is over-simplistic because it does not take into account the practical realities of the forex market (or any other ... Realized losses, unlike unrealized losses, can affect the amount of taxes owed.   A realized capital loss can be used to offset capital gains for tax purposes. From our example above, the ... Learn Forex Trading Investopedia Callander Accomodation What Books Should I Read In Order To Learn About Bitcoin Stocks And How To Trade Forex On News Releases Four Types Of Indicators For Fx Traders Forex Trading In Zimbabwe Backdoor To Trading Forex With Little Cfd Finance Investopedia Basics Of Fx Eaglesinvestors Learn Before Trade Why Leverage In Forex Honest Review What Is A Lot In Forex ... Learn about stop loss in forex trading and why it’s important. Plus, we roundup the top forex stop loss strategies and how to apply them. Forex trading involves significant risk of loss and is not suitable for all investors. Full Disclosure. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. *Increasing leverage increases risk. GAIN Capital Group LLC (dba FOREX.com) 135 US Hwy 202/206 Bedminster NJ 07921, USA. GAIN Capital Group LLC is a wholly-owned subsidiary of StoneX Group Inc ...

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4 Types of Indicators that FX Traders Must Know

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