Complete Understanding of Forex

Introduction to Forex

• Largest and most liquid market in the world.
• Trades about $6.6 trillion per day.
• No problem with getting orders filled.
• A global marketplace for exchanging national currencies.

Currency Pairs

• Forex is traded in currency pairs (exchange rate between two countries).
• Base Currency: The first currency in the pair, always equals 1.
• Quote Currency: The second currency in the pair, shows how much of it is needed to equal 1 base currency.
• Example:
  • AUD/USD:
    • AUD is base, USD is quote.
    • If 1 AUD equals 0.6504 USD, then USD is stronger.
  • EUR/USD:
    • EUR is base, USD is quote.
    • If 1 EUR equals 1.0713 USD, then EUR is stronger.

Brokers

• A Forex broker acts as a middleman between traders and the Forex market.
• Choosing a Broker:
  • Ensure they are regulated in a country that you know.
  • Find a broker with competitive spreads.
  • Example: Oanda (not sponsored).

Trading Platforms

• Most brokers have a built-in trading platform, but external ones can be better.
• Recommended Platforms:
  • MetaTrader 4 (MT4)
  • MetaTrader 5 (MT5)
  • TradingView:
    • Online platform, no downloads required.
    • Includes all necessary indicators and tools.
    • Tutorial available for using TradingView.

Pips (Percentage in Points)

• Definition: The standard movement in Forex trading.
• Fourth Decimal Place: In most pairs, the pip is the fourth decimal.
  • Example: 1.0709 to 1.0708 = 1 pip down.
• Yen Pairs Exception: For JPY pairs, the pip is the second decimal.
  • Example: 139.96 to 139.97 = 1 pip up.

Value of a Pip

• Depends on position size.
  • Nano Lot: 100 units, $0.01 per pip.
  • Micro Lot: 1,000 units, $0.10 per pip.
  • Mini Lot: 10,000 units, $1 per pip.
  • Standard Lot: 100,000 units, $10 per pip.
• Use Position Size Calculators to avoid manual calculations.
  • Example: MyFxBook.
  • Input: Account currency, account size, risk percentage, stop loss in pips.

Stop Loss and Risk Management

• Stop Loss: Pre-determined exit point for a loss.
  • Helps manage risk.
  • Set below key levels.
• Risk Management:
  • Determine how much of the account to risk per trade.
  • Use a position size calculator to establish position size and pip value.

Leverage

• Definition: Borrowed funds to increase position size.
• Function: Each pip will be worth more if position size is larger.
  • Risks increase along with the potential for larger losses.
• Leverage and Account Balance:
  • Example: 10:1 leverage on $10,000 -> $100,000 maximum position.
  • Use leverage wisely to manage multiple trades, not just larger positions.

Conclusion

• Understanding Forex basics is crucial for trading success.
• For more in-depth learning, consider mentorship and additional resources.
• Available discounts and support for beginners.
• Stay updated by subscribing and accessing content regularly.