Trade Forex Trading

Learn Forex Trading Online Free Tutorials

How to Trade Forex

Trading forex currencies in the online forex market can be a great investment alternative to the stock exchange market. When compared to the New York Stock Exchange which trade a daily turnover of $55 billion dollars every day, Forex is much bigger because it trades a daily turnover of $7.2 trillion dollars daily making Forex the largest and most liquid financial market in the world.

Forex is also a great alternative to trading the stock market because traders can make a lot of money without putting too much of their investment because they will be using leverage to trade and invest in the forex market.

To start Forex trading a trader will need to know the following forex basics.

Forex Basics

Currency Pair - Currencies are traded in pairs of two because forex trading is the exchange of one currency for another. An example of a currency pair is EURUSD which is the currency pair for trading EUROs against US Dollars. The first currency which is denoted as EUR is known as the base currency and the second currency which is USD is referred to as the quote currency.

Exchange Rate - The exchange rate is the price at which the base currency is quoted against the quote currency, for example if EURUSD exchange rate is 1.2600 it means that 1 EURO which is the base will be exchanged at a price of 1.2600 USD which is the quote currency.

Going Long - going long is the term used by traders to describe buying of a currency pair that traders thing will likely to go up in the future.

Going Short - going short is the term used by traders to describe selling of a currency pair that traders thing will likely to go down in the future.

Bid - or sell price, the bid is the price at which a trader can sell the currency

Ask - or buy price, the ask is the price at which a trader can buy the currency

Spread - The difference between the bid and ask price is what is known as the spread. For example EURUSD may be quoted at Bid/Ask price of 1.2500/1.2502 which means the spread is the difference between the two prices which is 2 pips. The spread for this example is therefore 2 pips.

Forex Quote - Forex quote is quoted at Bid/Ask price of 1.2500/1.2502, the quote on the left is the bid price and the one on the right is the ask price.

How to Trade Forex

Traders can determine when to open a trade and when to buy or sell using 2 different methods, these are:

1.Technical Analysis

2.Fundamental Analysis

Technical Analysis

Traders can determine the direction to trade whether to buy or sell using technical analysis. Technical analysis is the use of charts and technical indicators to determine the direction of the forex market trend.

Technical analysis traders use trading strategies to come up with forex trading systems that they can use to determine what direction the market to take.

Fundamental Analysis

Traders can also use fundamental analysis where traders will analyze economic reports so as to decide which currency to buy based on the economy of that country. Traders can determine how the economy of a particular currency is doing by looking at the economic reports coming from that country. If a country’s economy is doing well then the currency of that economy will also do well because other people will want to do business with that country and therefore the currency of that country will be more in demand therefore traders when trading will also choose to buy this currency.

A country’s economic reports such as GDP, employment reports, inflation reports and balance of trade will be used to gauge the strength of the economy that a particular forex currency belongs to.

The political stability of a country will also result in the currency of that country appreciating. This is because if a country is stable politically more companies will want to do business in that country because there will be less disruptions when it come to governance of the country.

How to Calculate Forex Profits

Forex traders will trade currencies so as to make profits from the currency market moves. To calculate the profits a trader needs to learn about forex pips. In forex the smallest movement which is a one point move is known as a pip. Forex profits will be calculated in pips.

For example, if EURUSD moves from1.2500 to 1.2510 this will be a 10 pip movement in the currency exchange rate. If a trader had opened a buy trade at 1.2500 and closed that trade at 1.2510 - the trader would have made a profit of 10 pips. Beginner traders should know that this is how forex profits are calculated from forex pip movements.

Choosing a Forex Broker To Trade With

Traders should do due diligence before opening a forex account with any particular forex broker. The first thing a trader should look for before opening an account with any forex broker is if the forex broker is regulated or not. All reliable forex brokers are the ones that are regulated. Forex broker regulation ensures that a broker is honest and reliable because they will submit their financial operations for audit by the regulator and this ensure transparency. All forex traders should make sure that the broker they trade with is regulated. A regulated forex broker is always a good choice for currency traders.

After looking for a few regulated forex brokers traders should then also consider other additional factors so as to ensure that they select the best broker for their trading style. For example traders should look at the financial instruments offered by the broker, a broker may offer a list of financial instruments which include Forex currencies, Metals such as Gold and Silver, Stock Indices, Futures as well as CFDs. Traders should look at the financial instruments provided for trading based on what they want to trade. For example forex traders should look at how many forex currencies are offered by a broker. Those forex traders who also want to trade other instruments such as metals, futures and stock indices alongside forex currencies.

How to Open a Forex Account

Traders should choose the type of account that they want to open based on the amount of capital they want to invest and the lot size they want to trade with. For example those traders who want to invest capital of $1,000 may choose to open a Micro account for trading micro lots and those with more than $50,000 capital may choose to open a Standard Account for trading standard lots.

The type of forex account that a trader opens will depend on the amount of money or the amount of capital that a trader wants to invest.

After choosing the account you want to open, you then need to fill out some paperwork; this paperwork includes account opening forms downloaded from your forex broker, and a copy of your ID card as well as proof of residence which includes any utility bill that has your name and your address of residency.

You need to then choose your leverage for your account, or may just choose to trade with the default leverage of 100:1.

After this you can then open trades from your and start trading the online market. You will then monitor your profit and loss and continue trading the market using your forex trading plan and forex trading strategy.

Regulated Forex Broker Information: Read About Regulated Forex Broker Review

Takes 5 Minutes to Open an Account, Open an Account Early: Open Forex Account


XM Copy Trading


Broker