Introduction to Forex      Trading

If you’ve ever traveled internationally, you’ve touched on the world of forex trading, though you may not know it: When you stepped off the airplane, one of your first stops probably was to exchange your money for the local currency.

How forex investors make (and lose) money

If the above explanation has you thinking you might be the next  Rich Person , you’re probably equal parts optimistic and fearless.

As noted at the start of this post, forex trading is risky. You’re making a bet that what you buy will go up in value. With forex, you want the currency you’re buying to go up relative to the currency you’re selling. If you bought a mini lot of a currency and it goes up 1 pip in value, your investment would be worth $1 more. If it goes down 1 pip, your investment would be worth $1 less.

That’s easy enough to understand — after all, whether you’re buying a house or the euro, you want what you buy to be worth more than you paid for it. Where things get hairy is that leverage mentioned earlier.

What is forex trading?

Forex trading turns that little airport or ATM currency exchange into a sport. When investors trade forex — commonly called FX — they’re buying and selling currencies over the foreign exchange market. It’s the largest financial market in the world but one in which many individual investors have never dabbled, in part because it’s highly speculative and complex.

A little healthy trepidation serves investors well. Active trading strategies and complex investment products don’t have a place in most portfolios. We strongly recommend low-cost index funds for long-term goals like saving for retirement.

But maybe you have that balanced portfolio in place, and now you’re looking for an adventure with some extra cash. Provided you know what you’re doing — please take those words to heart — forex trading can be lucrative, and it requires a limited initial investment.

How to read a forex quote

Being able to read and really understand a forex quote is, unsurprisingly, key to trading forex. Let’s start with an example of an exchange rate: EUR/USD 1.12044.

• The currency on the left (EUR) is the base currency and is always equal to one unit — 1€, in this example.
• The currency on the right (USD) is called the counter or quote currency.
• The number is what the counter currency is worth relative to one unit of the base currency. When that number goes up, it means the base currency has risen in value, because one unit can buy more of the counter currency. When that number goes down, the base currency has fallen. In this example quote, 1€ is equal to $1.12044.

You’re always buying or selling the base currency. Within a pair, one currency will always be the base and one will always be the counter — so, when traded with the USD, the EUR is always the base currency. When you want to buy EUR and sell USD, you would buy the EUR/USD pair. When you want to buy USD and sell EUR, you would sell the EUR/USD pair. for more CLICK HERE

Which Forex Pairs Can You Trade?

Forex currency pairs are known as majors, minors, and exotics.

Major currency pairs are made up of the most frequently traded currencies, which are:

• USD - The US Dollar
• EUR - The Euro
• JPY - The Japanese Yen
• GBP - The British Pound
• CHF - The Swiss Franc
• CAD - The Canadian Dollar
• AUD - The Australian Dollar
• NZD - The New Zealand Dollar

How Do Forex Quotes Work?

When trading Forex, you'll see that both 'Bid' and 'Ask' prices are quoted. The bid price is the price at which you can buy the currency, while the ask price is the price at which you can sell it. If you are purchasing a currency in a trade, this is known as a long trade, and the hope is that the currency pair will increase in value, so that you can sell it at a higher price and make a profit on the difference.

If you are selling a currency in a trade, the opposite is true - the hope is that the currency pair will fall in value, so that you can buy it back at a lower price, which means you will profit on the difference.

The number quoted for these prices is based on the current exchange rate of the currencies in the pair, or how much of the second currency you would get in exchange for one unit of the first currency (for instance, if 1 EUR could be exchanged for 1.68 USD, the bid and ask price would be on either side of this number). Learn more about Forex quotes in this article: Understanding and Reading Forex Quotes. for easy way to win trading CLICK HERE

What Are the Benefits of Forex Trading?

Now that we've shared an overview of the Forex market, why might you want to trade Forex?

There are a number of reasons why people choose to start day trading. Some of these reasons might include the potential to earn extra money on the side from the comfort of their own home, the opportunity to learn a new skill in their own time, or even the dream of achieving financial freedom, and having more control over their financial future. When it comes to Forex specifically though, there are a number of benefits that make this financial instrument a very enticing one to trade.

If you would like to learn more about the differences between the Forex market and the Stocks market, why not check out our comparison article on the topic? And find out which market is right for you! Forex Vs. Stocks: Should You Trade Forex or Stocks?

Forex: The World's Largest Financial Market

Forex is the world's largest financial market, with over 5.09 trillion USD traded every single day (April 2016). To put it in other words, in a single day, more money will be traded in the Forex markets than Japan's entire GDP! (Gross Domestic Product). Of these transactions, 254 billion USD is traded through CFDs and other derivative instruments.

Being the largest, most active financial market on the globe, it is also the world's most liquid market, meaning it is easy for traders to enter into, as well as exit trades, and for the most liquid pairs, they can do so at a very low cost (even less than a single pip!). This also means that the Forex market is very volatile, creating many opportunities for traders to make a profit on both the positive and negative movements of currency pairs.

Trade Around the Clock

Forex is the one financial market that never sleeps, meaning you can trade at all hours of the day (or night). Unlike the world's stock exchanges, which are located in physical trading rooms like the New York Stock Exchange or the London Stock Exchange, the Forex market is known as an 'Over-the-counter market' (or OTC). This means that the trades take place directly between the parties holding the currencies, rather than being managed via an exchange.

Consequently, the Forex market has never been restricted to the business hours of any one exchange.

However, since the Forex market is a global market, it means there is always a part of the world that is awake and conducting business, and during these hours their currencies tend to experience the most movement. For example, currency pairs involving the US dollar experience the most movement during US business hours (16:00 to 24:00 GMT), while the Euro, Pound, Swiss Franc and other European currencies experience the most movement during European business hours, (8:00 and 16:00 GMT).

By contrast, the Australian Dollar, the New Zealand Dollar and the Japanese Yen tend to be more active between 00:00 and 08:00 GMT. As a trader, this means you can trade whenever it suits you - if you work during the day, there will be currencies available to trade before or after work. If you have children but are at home during the day, you can simply choose a different currency. In the Forex market, you can trade 24 hours a day, 5 days a week.  for easy way to win trading withouth doing any research CLICK HERE

Speculate on Rising or Falling Prices

One of the most common trading and investment philosophies is to 'buy low and sell high' - this is particularly the case with long-term investments, such as investing in stocks or bonds, which rely on the asset increasing in value. In the Forex market, you can also sell high and buy low. This way, you can potentially make profits on both downward and upward trends.

As mentioned earlier, in a long trade (also known as a buy trade), a trader will open a trade at the bid price, and will aim to close the trade at a higher price, making a profit on the difference between the opening and closing value of the currency pair. So if the EUR/USD bid price is 1.16667, and the trade closes at the price of 1.17568, the difference is 0.00901, or 90.1 pips. (When trading a single lot, that would make a 901 USD profit).

Traders can also make short trades (also known as sell trades), where they sell a Forex CFD at the ask price and, once the price drops, buy it at a lower bid price, and profit on the difference. In this case, if the GBP/USD ask price was 1.32265, and the trade closed at the price of 1.31203, the difference would be 0.01062, or 106.2 pips (which would amount to 1,062 USD in profit).

Low Costs of Forex Trading

Due to Forex CFDs being leveraged, traders can access large portions of the currency market at a very low margin - sometimes as low as 1/500th of the size of the market they want to access (based on a leverage rate of 1:500). There are few additional costs as well - most Forex trading accounts have little (or no) commissions, order fees, and account management fees. If there are any trading fees, these are usually a markup the broker has added to the spread.

Ease of Access

One of the greatest advantages of Forex trading is that it is one of the most developed financial markets in terms of technology. While many markets are accessible via old-fashioned trading platforms, there is constant competition in terms of the software available for trading the FX market.

The platforms offered by Admiral Markets include MetaTrader 4 (MT4) and MetaTrader 5 (MT5) and MetaTrader WebTrader. MT4 and MT5 are both available for Windows, Mac, Android and iOS devices (for iPhone and iPad). In addition, Admiral Markets also provides traders with an enhanced version of MetaTrader, known as MetaTrader Supreme Edition.

With access to all this software, Forex can be traded from anywhere in the world - and all you need is an internet connection. In fact, you can start trading in a risk-free environment now with a free demo account.

How Much Do Currency Values Change (Or, How Liquid Are Different Forex Pairs)?

If the way traders make a profit is by cashing in on the difference between the bid and ask prices of currency pairs, the next logical question is, how much can you expect any given currency to move?

This depends on how liquid the currency is, or how much of it is being bought and sold at any one time. The most liquid currency pairs are the ones with the most supply and demand in the Forex market, and this supply and demand is generated by banks, businesses, importers and exporters, and traders. Major currency pairs tend to be the most liquid, with the EUR/USD currency pair moving by 90-120 pips on an average day.

By contrast, the AUD/NZD moves by 50-60 pips a day, and the USDHKD currency pair only moves by an average of 32 pips a day (when looking at the value of currency pairs, most will be listed with five decimal points. A 'Pip' is 0.0001. So, if the EUR/USD moved from 1.16667 to 1.16677, that would represent a 1 pip change). The major Forex pairs tend to be the most liquid, and therefore provide the most opportunities for short-term trading.

However, there are many opportunities among minor and exotic currencies as well, particularly if you have some specialized knowledge about a certain currency.

What is the Forex Spread?

The spread, in Forex, is the difference between the bid and ask price of a currency pair. For example, if the Bid price of the EUR/USD is 1.16668, and the sell price is 1.16669, the spread will be 0.0001, or 1 pip. In any Forex trade, the value of a currency pair will need to cross the spread before it becomes profitable. To continue with the previous example, if a trader entered a long EUR/USD trade at 1.16668, the trade wouldn't become profitable until the value of the pair was higher than 1.16669.

In a currency pair with a wider spread, such as the EURCZK, the currency will need to make a larger movement in order for the trade to become profitable. At the time of writing, the bid price for this pair is 25.4373, while the ask price is 25.4124, so the spread is 0.0200, or 20 pips. It's also not uncommon for this currency pair to have movements of less than 20 pips a day, meaning traders will likely need to perform a multi-day trade to make a profit.

This means that low-spread trading is often a priority for Forex traders, as their trades can become profitable quicker, meaning that they can make a high volume of smaller trades, rather than relying on larger trades to make money.

What are Forex CFDs?

If you've been researching Forex trading, you might have seen the term 'Forex CFDs' at some point. There are two ways to trade Forex: using CFDs or spot Forex (also known as margin). Spot Forex involves buying and selling the actual currency. For example, you might purchase a certain amount of Pound Sterling for Euros, and then, once the value of the Pound increases, you may then exchange your Euros for Pounds again, receiving more money back compared with what you originally spent on the purchase.