Forex92
New member
Learning to trade FX is perfect for those seeking financial freedom and success. Making consistent income from it needs a lot of effort, dedication, and discipline. Failing to gain proper trading expertise and instructions, most new traders fail very soon. But, if done correctly, forex trading may be incredibly successful.
Forex is the world's largest financial market, and it attracts newcomers daily due to its quick passive earning potential. To trade forex, you do not need any qualifications or certificates. All you need is a laptop, Internet connectivity, and some cash to get started. This is why forex trading is so popular today with millions of traders worldwide.
This step-by-step guide will cover all you need to know about trading FX as a novice.
Why Forex?
Forex (foreign exchange) is often known as FX or currency trading. In fact, it has a daily turnover of over $5 trillion dollars, more than all US equity and Treasury markets combined.
What is Forex?
Forex is a global and decentralised currency exchange market.
Unlike other financial markets (like the stock exchange), the global Forex market is decentralised. In it, banks, financial organisations, and individuals trade national currencies electronically.
Each of these currencies has an exchange rate. For example, a EUR/USD exchange rate of 1.10 means that 1 Euro is worth 1.10 US Dollars.
Market Hours
The currency market is open 5 days a week, 24 hours. But it doesn't mean it's always on. Let us examine a 24-hour forex day.
The FX market has four major trading sessions: Sydney, Tokyo, London, and New York.
Why Forex?
So, why Forex? Trading Forex has several benefits.
If we ask four people, we may get four different replies. Making money is the main reason why people trade Forex.
Consider why so many people choose the FX market:
24 hour market
The Forex market is open 24 hours a day, 5 days a week, so you don't have to wait for the opening bell.
The currency market runs from Monday morning's Sydney session opening to Monday afternoon's New York session close. This permits us to trade whenever we want, regardless of the hour.
Affordability
It is free to trade FX and there are no exchange or data licence costs.
Retail transaction fees (the bid/ask spread) are usually less than 0.1 percent in normal markets. Larger dealers (with high volumes) may have a spread as low as 0.05 percent.
Leverage
Leverage allows traders to take positions considerably greater than their initial commitment, allowing them to profit from modest market movements.
It is one of the things that attracts new traders to forex trading. Few forex traders grasp the benefit of financial leverage.
Minimal risk
Traders can open micro accounts for a few dollars. Forex trading has a 500:1 leverage. It simply means that you can control 100 times more assets than you invested.
Liquidity
The FX market can handle daily transactions of up to 1.5 trillion dollars.
This is a large volume. There are always sellers and buyers accessible regardless of currency kind.
So, if a trader wants to buy, there is always a seller available, and vice versa.
Accessibility
Starting out as a currency trader is not as expensive as trading stocks, options, or futures.
Some online forex brokers allow you to start a trading account with a minimum deposit of $25. An ordinary person with limited trading capital can now open an FX trading account.
Who Trades Forex?
The key players in this market are:
Hedge funds – Speculators – Pension and mutual funds – Insurance firms – Forex brokers
Forex jargon
FX spot
Spot FX involves real-world currency exchange. For example, you can buy a particular quantity of pounds sterling for euros, and then swap your euros for the pounds you bought. Can recoup more than the buying price.
Differences Contract (CFD)
In forex trading, you may come across the term ‘Forex CFDs'.
Forex trading is done via CFDs or spot forex. A CFD is a contract used to reflect price fluctuation in financial products.
In forex trading, this means you can profit on price swings without owning the asset.
Stocks, indices, bonds, commodities, and cryptocurrencies are all available as CFDs. To trade on the price changes of these assets, you must first buy them.
Pip
A pip is the smallest variation in a currency price.
A currency pair's base unit of price is 0.0001 of the stated price. So, when the EUR/USD bid price rises from 1.16667 to 1.16677, it reflects a 1 pip change.
Spread
In forex, the spread is the difference between the bid and ask price.
If the EUR/USD bid price is 1.16668 and the selling price is 1.16669, the spread is 0.0002, or 2 pips.
For a forex trade to be lucrative, the value of the currency pair must exceed the spread.
Sq.ft
A lot is a deal measurement unit. Your trade is always worth an integer number of lots (lot size * lots).
Choosing the right position or lot size for each transaction is critical to success. The position size refers to the number of lots (micro, mini, or normal) you trade.
Leverage
This principle is essential for a newbie learning to trade forex.
Leverage is a forex broker's capital that allows clients to trade more.
For example, the EUR/USD exchange rate is 1.1150, and we want to buy 1 lot (100,000 units).
If our leverage is 1:500, the needed margin is $100,000 / 500 = $200.
When leverage works in our favour, it increases earnings, but when it works against us, it can generate tremendous losses. So be cautious when utilising leverage in Forex trading.
Margin
Margin is the amount of money required to open a trade with your broker.
Consider the leverage example of a $100,000 position with a $1000 starting deposit. This $1000 deposit was the “margin” required to open a trade and apply leverage.
For example, a 5% margin gives you a 20:1 leverage, whereas a 0.5% margin gives you a 400:1 leverage.
Pessimist
The bear (bearish) market is one that is declining.
That is, when the value of a currency falls. Price declines deep and quick are deemed bearish.
In a bear market, investors sell riskier assets like stocks and less liquid currencies like those from emerging nations. Losses are more likely because prices are constantly falling. Better to sell short or move to safer investments like gold or fixed-income instruments.
A market
A bull (bullish) market is one that is increasing.
In a bull market, traders and investors are confident. There is optimism and hope for continued success. Overall, a bull market happens when the economy is doing well, with low unemployment and rising GDP.
Trades for a
Going long means buying a currency pair. When buying a currency pair, you are buying the first currency and selling the second (indicating you are bearish).
For example, if you buy a EUR/USD currency pair, you expect the Euro to rise and the Indian rupee (USD) to fall.
Forex is the world's largest financial market, and it attracts newcomers daily due to its quick passive earning potential. To trade forex, you do not need any qualifications or certificates. All you need is a laptop, Internet connectivity, and some cash to get started. This is why forex trading is so popular today with millions of traders worldwide.
This step-by-step guide will cover all you need to know about trading FX as a novice.
Why Forex?
Forex (foreign exchange) is often known as FX or currency trading. In fact, it has a daily turnover of over $5 trillion dollars, more than all US equity and Treasury markets combined.
What is Forex?
Forex is a global and decentralised currency exchange market.
Unlike other financial markets (like the stock exchange), the global Forex market is decentralised. In it, banks, financial organisations, and individuals trade national currencies electronically.
Each of these currencies has an exchange rate. For example, a EUR/USD exchange rate of 1.10 means that 1 Euro is worth 1.10 US Dollars.
Market Hours
The currency market is open 5 days a week, 24 hours. But it doesn't mean it's always on. Let us examine a 24-hour forex day.
The FX market has four major trading sessions: Sydney, Tokyo, London, and New York.
Why Forex?
So, why Forex? Trading Forex has several benefits.
If we ask four people, we may get four different replies. Making money is the main reason why people trade Forex.
Consider why so many people choose the FX market:
24 hour market
The Forex market is open 24 hours a day, 5 days a week, so you don't have to wait for the opening bell.
The currency market runs from Monday morning's Sydney session opening to Monday afternoon's New York session close. This permits us to trade whenever we want, regardless of the hour.
Affordability
It is free to trade FX and there are no exchange or data licence costs.
Retail transaction fees (the bid/ask spread) are usually less than 0.1 percent in normal markets. Larger dealers (with high volumes) may have a spread as low as 0.05 percent.
Leverage
Leverage allows traders to take positions considerably greater than their initial commitment, allowing them to profit from modest market movements.
It is one of the things that attracts new traders to forex trading. Few forex traders grasp the benefit of financial leverage.
Minimal risk
Traders can open micro accounts for a few dollars. Forex trading has a 500:1 leverage. It simply means that you can control 100 times more assets than you invested.
Liquidity
The FX market can handle daily transactions of up to 1.5 trillion dollars.
This is a large volume. There are always sellers and buyers accessible regardless of currency kind.
So, if a trader wants to buy, there is always a seller available, and vice versa.
Accessibility
Starting out as a currency trader is not as expensive as trading stocks, options, or futures.
Some online forex brokers allow you to start a trading account with a minimum deposit of $25. An ordinary person with limited trading capital can now open an FX trading account.
Who Trades Forex?
The key players in this market are:
Hedge funds – Speculators – Pension and mutual funds – Insurance firms – Forex brokers
Forex jargon
FX spot
Spot FX involves real-world currency exchange. For example, you can buy a particular quantity of pounds sterling for euros, and then swap your euros for the pounds you bought. Can recoup more than the buying price.
Differences Contract (CFD)
In forex trading, you may come across the term ‘Forex CFDs'.
Forex trading is done via CFDs or spot forex. A CFD is a contract used to reflect price fluctuation in financial products.
In forex trading, this means you can profit on price swings without owning the asset.
Stocks, indices, bonds, commodities, and cryptocurrencies are all available as CFDs. To trade on the price changes of these assets, you must first buy them.
Pip
A pip is the smallest variation in a currency price.
A currency pair's base unit of price is 0.0001 of the stated price. So, when the EUR/USD bid price rises from 1.16667 to 1.16677, it reflects a 1 pip change.
Spread
In forex, the spread is the difference between the bid and ask price.
If the EUR/USD bid price is 1.16668 and the selling price is 1.16669, the spread is 0.0002, or 2 pips.
For a forex trade to be lucrative, the value of the currency pair must exceed the spread.
Sq.ft
A lot is a deal measurement unit. Your trade is always worth an integer number of lots (lot size * lots).
Choosing the right position or lot size for each transaction is critical to success. The position size refers to the number of lots (micro, mini, or normal) you trade.
Leverage
This principle is essential for a newbie learning to trade forex.
Leverage is a forex broker's capital that allows clients to trade more.
For example, the EUR/USD exchange rate is 1.1150, and we want to buy 1 lot (100,000 units).
If our leverage is 1:500, the needed margin is $100,000 / 500 = $200.
When leverage works in our favour, it increases earnings, but when it works against us, it can generate tremendous losses. So be cautious when utilising leverage in Forex trading.
Margin
Margin is the amount of money required to open a trade with your broker.
Consider the leverage example of a $100,000 position with a $1000 starting deposit. This $1000 deposit was the “margin” required to open a trade and apply leverage.
For example, a 5% margin gives you a 20:1 leverage, whereas a 0.5% margin gives you a 400:1 leverage.
Pessimist
The bear (bearish) market is one that is declining.
That is, when the value of a currency falls. Price declines deep and quick are deemed bearish.
In a bear market, investors sell riskier assets like stocks and less liquid currencies like those from emerging nations. Losses are more likely because prices are constantly falling. Better to sell short or move to safer investments like gold or fixed-income instruments.
A market
A bull (bullish) market is one that is increasing.
In a bull market, traders and investors are confident. There is optimism and hope for continued success. Overall, a bull market happens when the economy is doing well, with low unemployment and rising GDP.
Trades for a
Going long means buying a currency pair. When buying a currency pair, you are buying the first currency and selling the second (indicating you are bearish).
For example, if you buy a EUR/USD currency pair, you expect the Euro to rise and the Indian rupee (USD) to fall.
