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The complete forex trading guide for beginners

Forex Trading for Beginners

What is Forex?

As a forex trading guide for beginners, we must first define what the forex market is.

The forex market is a global marketplace where currencies are traded and where exchange rates for every currency are defined. It stands for “foreign exchange”. But its also known as “FX.”

Currencies are essential because they enable the purchase of goods and services locally and abroad. International currencies need to be exchanged to conduct foreign trade and business.

In a nutshell, the foreign exchange market works like most other markets in that it is subject to supply and demand. Forex is a decentralized market or over-the-counter (OTC) involving buying, selling, and exchanging currencies.

With an averaging trading volume of around $6 trillion per day, it is the largest market in the world. And it works round-the-clock 24 hours during five days a week (only closed during weekends).

The market opens with Asia (New Zealand, Australia, Japan), then it passes the baton to London and finally hand-over to New York, to repeat the whole cycle again and again until Friday. Unlike other markets, currencies are traded at all times during weekdays. 

How to trade Forex

The market is set in currency pairs. For example, Euro vs. Us Dollar (known as EUR.USD) and traders make predictions trying to take advantage of the price movement while trading derivatives, such as rolling spot forex contracts.

In other words, when trading, you don’t actually own a truckload of Euros or Dollars and get delivered to your front door. Instead, using derivatives allows you to speculate on the pair’s price movement without owning the asset; brilliant, right? 

Using a simple example, if there is a strong demand for the US Dollar from Europeans holding Euros, they will exchange their Euros into Dollars. In simple words, they are selling Euros to buy Dollars.

How to read a Forex pair?

Each currency in the pair is listed as a three-letter code. Where the first two letters stand for the country (or region), and the third letter stands for the currency itself.

If EUR.USD is trading at 1.21645, the one Euro is worth 1.21645 US Dollars

Selling (Short) – Bearish

Following the previous example, the sell-off of one currency brings its price lower, and traders take advantage of that downward movement to enter the market with short (sell) orders.

Buying (Long) – Bullish

On the contrary, when a strong buy of a currency, it brings its price high, and traders take advantage of the uptrend movement to enter the market with long (buy) orders.

When a person trades in the Forex market it basically means is trading on the country’s economical shape and its currency strength. A country with good economic indicators such as high employment rate, low unemployment rate, high consumer price index (CPI) etc, has a strong currency.

While when traders are in the stock market, they usually follow the KPI of a company, such as cash flow, present value, intrinsic value, sells, operational cost and countless other factors that a trader should consider for the fundamental analysis.

Related: Common Mistakes Made Trading Forex

Why trade forex?

The forex market is unparalleled due to its

  • Huge trading volume, representing the largest asset class in the world, leading to high liquidity.
  • Continuous operation: 24 hours a day except for weekends.
  • Easy to grasp the diversity of factors that affect currency exchange rates.
  • Use of high leverage to enhance profit and losses relative to account size.
  • No need for large capital to start trading.

How to start trading Forex

For us, retail traders, we need a broker, but not just any broker. 

A broker is nothing else but the bridge that allows us to connect to the market and major banks. They take our trades and send them into the market through the liquidity providers (LP). Now, would you cross a bridge that looks unsafe? I am sure you wouldn’t. That is why we need to be sure that we are choosing a good broker. 

Nowadays, the options are limitless, and I know it is hard when we are starting to get the correct information in such a critical mission; how to choose a broker? 

Knowing how to select your broker is a super important task in your venture in the financial field. Being very clear about the factors to consider will help you operate safely, reliably, and with a low operating costs environment. Above all, this is what we need.

For many who are starting in this world, the broker is nothing more than a bridge that allows you to access the financial markets. It connects your operations to liquidity providers, therefore your positions or market entries are guaranteed in price and execution time. Allowing you to get the best out of all your entries.

These are the four key points that you should know; let’s start:
  1. Get a full-regulated broker.
  2. Know your broker commission fees.
  3. Check the payment channel options.
  4. Please get to know their platform (trading software) and products (standard and/or ECN accounts)

And last but not least, a simple search on the internet can give you information about their services support, deposit/withdrawals process and so on. A good webpage for this purpose is Forex Peace Army.

This is it for today’s article, and I hope the information delivered helps you clarify some concepts and gives you more confidence about this beautiful market. 

In the coming articles, I will write about the difference between fundamental and technical analysis, how to make your analysis. This will give you the needed edge to start making your decisions. Remember that the risk when investing comes from not knowing what you are doing. Please check our educational session in Surf-Up; a prime source of free information that will help you overcome the learning curve; check it out.

Quote of the day

“A trader’s job is to solve the market puzzle.” 

 

Tradeview Ltd. is not a portfolio manager or an investment advisor. This Market Report is for informational purposes only. Any statements made or opinions voiced in this Market Report do not constitute investment advice. The Tradeview Ltd. Market Report does not constitute a solicitation to buy or sell in the financial markets. Although the information contained in the Market Report comes from trusted sources, Tradeview Ltd. is not responsible for guaranteeing the accuracy, timeliness, completeness, or fitness of such sources. Tradeview Ltd. shall not be responsible for and disclaims all liability for any losses which may be suffered from access and use of the contents of the Tradeview Ltd. Market Report. Trading any financial instrument on margin, using leverage or otherwise involves considerable risk. Therefore, before deciding to participate in any style of trading, you should carefully consider your investment objectives, level of experience and risk appetite. Most importantly, do not invest money you cannot afford to lose. Consulting with your investment counselor, attorney, accountant or other professional upon whom you rely for guidance as to the appropriateness of an investment in any style of trading is recommended.

Tradeview Ltd.

Is licensed to carry on securities investment business and is regulated by the Cayman Islands Monetary Authority (CIMA) as a full securities broker-dealer. Tradeview conducts business pursuant to the Cayman Islands Securities Investment Business Law (SIBL) and its activities fall under the direct supervision of the Investments and Securities Division of CIMA.
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Is licensed and regulated by the Labuan Financial Services Authority (FSA) as a Money Broker, registration number LL15870 licensed to facilitate transactions in foreign exchange pursuant to Labuan Financial Services and Securities Act 2010, the Labuan Companies Act 1990 and the Labuan Business Activity Tax Act 1990.
Headquarters: International Business Financial Centre at Office 5, Jamie Business Center I, Unit F10, First Floor, Paragon Labuan, Jalan Mustapha, 87000 Labuan F.T.
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Is licensed as a Category 2 Investment Service Company and is regulated by the Malta Financial Services Authority (MFSA). The Malta Financial Services Authority (MFSA) is the single regulator for financial services in Malta. MFSA is a fully autonomous public institution and reports to Parliament on an annual basis. The MFSA is a member of the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA) and the International Organization of Securities Commissions (IOSCO) and is a signatory of the Multilateral Memorandum of Understanding with other European regulatory Institutions. Tradeview is authorized to provide financial services across multiple asset classes and is passported in the EU/EEA under MiFID II (EU Markets in Financial Instruments Directive).
Headquarters: 157 Archbishops Street, Valletta VLT Malta 1440.
Website: www.tradeview.eu

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Is authorized to conduct business pursuant to and in compliance with the General Law of Companies (LGS) promulgated by the government of Peru. Tradeview Financial Markets S.A.C is registered with the National Superintendence of Public Registries (SUNARP), company number 13089531. Tradeview Financial Markets S.A.C provides financial services in selected OTC derivative markets in compliance with all applicable government regulations.
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