Forex Trading Tutorial
Forex trading tutorial: about the basics in short
The Forex market is only one of the many others available today. Among the bond, shares, stocks and commodities markets, Forex is considered to be to one that offers the best opportunities.
In fact, it is the biggest financial market in the world. Its benefits are the possibilities to trade non-stop from Monday to Friday, there is a good daily turnover, and good profits are available.
Before going into real trading, it is recommended to complete a Forex trading tutorial. This will give the user basic knowledge about this field and explain some details about the available markets.
We have prepared this article for people willing to join this market.
At first, let us have a look at forex orders. There are two kinds of orders which have their own pros and cons.
Instant or Market orders As stated in the name, these orders are conducted instantly at market prices. So, if you buy or sell at this precise moment, your earnings or spendings will be a fixed price that can be seen at once.
So, when you “BUY”, you wait for the value of your purchase to increase and then sell it for more money. If you “SELL”, you earn money from the current market price and expect for prices to fall soon.
Pending orders Pending orders are a great way to make your trading experience a bit less risky. There is a “stop-loss” that will sell your position automatically when the price falls towards a number you have entered to prevent high losses.
There also is a “trailing stop” that rises as prices do too. It goes only one way - up. If the value goes down, the “trailing stop” remains on its position and locks on potential profits for the trader.
A “limit order” is available here as well. Here the price at which the trader wants to conduct a trade is entered and it will only occur at this specific number. It is something like a guarantee for those who can’t monitor the markets often enough.
When is it better to trade?
Although there is a possibility to conduct trades 24 hours 5 days a week, it is not recommended to do so. A Forex pair should not only be traded when it is active but also when there is enough volume.
For example, if you trade on weekends, you will see a small volume. At specific hours currency pairs, such as GBP/USD have increased volatility that allows creating profits that can be high enough.
Experts say that the best time to trade is when all the markets are open and the highest activity period is reached. Also, it is important to remember that news can be a stimulator for the market in both ways and change the activity significantly.
Read: Forex Trading Basics You Should Know
What markets are there?
In Forex trading there are four main markets that vary by their opening time, working currency pairs and other details. The markets are:
The New York market is watched closely by investors as in 90% of all trades the U.S. dollar is involved. At times when only the Tokyo market is open, it is recommended to look after the USD/JPY pair. The reason is the influence of the Bank of Japan on the market. It can be a really profitable pair if you grab the moment.
In the Sydney markets there often is a lot of activity at the beginning of the trading week. The reason is that it is the first to open and people and institutions are willing to regroup after the weekend pause.
London is considered to be the central trading capital of the world. Forex trends often start up on these markets, so it is a good idea to keep an eye on them.
Forex trading signals
The next part of our Forex trading tutorial is going to be about trading signals. If you have read our other articles related to cryptocurrencies, you should already know the meaning of signals. These are indicators for what action should be done: buy, sell, keep.
Usually, they are offered for free by the platform that is used. Maxitrade offers automated trading signals that are based on the previous movements, the predicted future movements, the current situation on the market and other criteria.
You can also find signals that are offered for money on the Web. They can also be used, but make sure you work with a professional and aren’t cheated by fake signals.
What are pips in Forex?
Pips in Forex represent the currency pairs’ value changes.
For example, if you say that the EUR/USD pair rises from 1.1000 to 1.1005, this means that there was an increase in 5 pips. In most currencies, 1 pip is the fourth decimal place of the exchange rate.
However, in some other pairs with the Japanese yen, such as USD/JPY a change from 100.01 to 100.06 will also mean an increase in 5 pips. This is because here 1 pip is the second decimal place.
The Forex market hasn’t got movements bigger than 1% a day. Leverage allows increasing profits for this. Basically, when you use leverage, you borrow money from your broker to conduct a trade of a higher position than your account balance allows.
100:1 means that you will create a position 100 times larger than your account could allow you to. It is good for profitable deals, but remember that it increases losses as well.
We have reviewed the most basic information regarding forex trading. This includes a bit about markets, orders, trading times, pips, and leverage.
We hope this short Forex trading tutorial was helpful to you. If you want to learn more about it, contact your personal financial analyst.
Read: Forex Trading Tips. 20 things you need to know to become a successful trader