As a beginner, forex trading is hard to get started with。But if you learn the basics, you can get started right away。The more you develop and practice, the greater the profit potential。

What is Forex Trading？

Forex is an abbreviated combination of two words: foreign currency and foreign exchange, which refers to the foreign exchange market that trades all currencies in the world.。

FOReign currency+ EXchange(Transaction)

Forex trading, then, is the act of buying and selling currencies in the foreign exchange market, which involves trading two currencies against each other in the form of so-called "currency pairs."。

foreign exchange market

The foreign exchange market is the world's largest trading market, with daily turnover of more than $5 trillion, 24 hours a day, 5 days a week.。

To put this in perspective, the New York Stock Exchange (NYSE), the world's largest stock exchange, has an average daily trading volume of about $169 billion, making the foreign exchange market roughly thirty-two times larger than the NYSE.。

Such large trading volumes do not occur on any normal trading floor, and the Forex market is an electronic network of banks, brokers, institutions and traders from all over the world.。

The normal trading market will close at a set time depending on the location, but the foreign exchange market will never really close。While it's true that it's only open 5 days a week, the only thing that's "off" is the ability for retail traders to participate。

In fact, due to the never-ending international trade and the need for central banks and global industries to do business, the market is never really closed.。

How Forex Trading Works？

The foreign exchange market works like any other market where prices are prone to volatility (e.g. the stock market)。Traders can profit from trading currencies by correctly predicting whether currency prices will appreciate or depreciate。

This is not as easy as it sounds, and factors such as the economy, market demand and geopolitics affect exchange rate fluctuations.。Predicting when prices are about to change also requires a good understanding of technical analysis。

forex trading session

Each day in the market is divided into three peak trading sessions called the Forex Three-Period System。

The three main periods are:

These three cities represent the main financial centers in each region, and traders usually focus on one of these three trading cycles because that is when the market is most active.。

You'll also notice that there was a time when both periods were open at the same time。As between 12: 00 and 16: 00 GMT, the New York and London periods overlap。

The market is busiest during periods when the two trading sessions overlap, as more traders are active during this period。

Currency pairs

Trading in the Forex market to buy or sell in currency pairs。A currency pair is a quote from one currency to another, indicating how much of one currency is needed to buy another, also known as an exchange rate。

For example, in the GBP / USD currency pair, you buy USD by selling GBP。The first currency listed is called the base currency and the second currency is called the quote currency。

In total, currency pairs are divided into three categories:

• "Major currency pairs": currency pairs including the United States dollar
• "Minor Currency Pairs": Currency Pairs Not Related to the Dollar
• "Bizarre currency pairs": currencies from emerging markets, such as the Singapore dollar (SGD)

Major currency pairs

For beginners, the best way to start Forex trading is to use one of the most popular currency pairs, also known as "major currency pairs."。The prices of major currency pairs move more frequently because more traders are actively buying and selling these pairs。This, in turn, will give you more trading opportunities。

secondary currency pair

These currency pairs are referred to as "minor currency pairs" and do not include the United States dollar (USD)。While trading is less active, they still offer you plenty of trading opportunities。Some of the most common minor currency pairs include:

exotic currency pair

Bizarre currency pairs include the currencies of emerging economies such as Brazil, Singapore or Turkey.。These currencies are often paired with one of the major currencies (USD, GBP, JPY, CHF) and are more sensitive to geopolitical and economic events that cause currency fluctuations.。

Chart Type

Trading charts show information such as market / price movements that forex traders use to help them decide when to enter or exit a position。Knowing how to read charts (also known as technical analysis) will help you spot patterns and identify market trends。

Taking advantage of market sentiment or wind direction is how forex traders make money。While there are many different types of charts available, the most common ones you'll encounter are:

Candle chart

The candle chart was first used by Japanese rice traders in the 18th century. It is similar to the OHLC bar chart and also shows us the opening price, highest price, lowest price and closing price in a specific time period.。

However, the difference between the two is that there is a "box" between the opening price and the closing price of the candle chart, also known as the "main body" of the candle。Many traders prefer candle charts because they are easy to observe。For beginners, they are the easiest charts to read and understand。

Line Chart

Line and candle charts show the opening and closing prices over a period of time, as well as the price movement during that time, while line charts are simpler。It connects the closing prices in the time frame you are viewing, and is mainly used to identify "big picture" trends。

They are perfect for showing trends over time - but otherwise they are useless。They lack other important information, such as the highest and lowest prices reached by the price, so they are not as accurate as other charts。

Bar Chart / OHLC Chart

A bar chart or OHLC (Open Price - Highest Price - Lowest Price - Close Price) chart is essentially an upgraded version of a line chart。The chart shows vertical lines, the top and bottom of which show us the highest and lowest prices, while the vertical lines indicate the opening price (left) and the closing price (right)。

Green bars represent buyer bars, red bars represent seller bars。Bar charts are useful because they can help determine who is controlling the market - whether it is a buyer (bull market) or a seller (bear market)。

Foreign exchange terminology

Before you start trading, you need to master some basic terms, the following are the most important:

• Selling price: the price at which you can buy currency, the money supply。
• Buy price: the price at which you can sell the currency, the demand for the currency。
• Bid / ask spread: the difference between the bid and ask prices。
• Brokers: Companies that provide access to trading platforms。
• Margin: Minimum margin required to open a position。
• Point: The minimum amount that a currency quote can change。
• Long: Buy currency pairs。
• Short: Sell currency pairs。
• slippage: the difference between the expected price and the execution price。
• Bullish market: price increases - buyer control。
• Bear market: falling prices - sellers in control。
• Leverage: The ability to open a position is greater than the margin or amount in your account。

foreign exchange order

An order is an automatic order issued to your broker to open or close a trade (ie buy or sell currency) after meeting a specific set of instructions or conditions。Forex orders are useful because they allow you to set your own limits and minimize your exposure。

You can use different types of orders at the same time, giving you full control over your trading。The four types of orders you need to be aware of are:

• Market Order
• Limit Order
• Take Profit Order
• Stop Loss Order

Market Order

Market orders are the most basic order type available to traders。It is instant execution of orders, which means you will open or close trades at the current market price。Market orders can enter the market quickly. In a highly volatile market, there may sometimes be a difference between the price you choose and the price you execute, also known as slippage。

Limit Order

If you use a limit order, you will enter or exit the market only when the price reaches the level you want。The disadvantage of this is that if the price does not reach the level you are waiting for, you may never really enter the market。On the bright side, if the cards fall into your hands, then the limit order can let you enter at a "cheaper" price。

Take Profit Order

Just like a limit order, a take profit order is executed once the price conditions are met。Take profit orders "stop" execution of orders until the price exceeds a certain level, that is, buy when the price is above £X and sell when the price is below £Y。

Stop Loss Order

As the name suggests, stop orders help limit your potential losses。An earlier order will get you into a trade, while a stop order will get you out of a trade that will be worse after a certain price level is reached。Setting up a stop loss allows you to get rid of losing trades and thus continue the fight。

How to trade Forex

You only need to follow five steps to start Forex trading:

1.Opening an account with a broker

In order to trade forex, you must first open a trading account with a broker。Most brokers offer real demo accounts to familiarize you with the platform and practice trading with virtual currencies。Once you are ready, you can switch to a real account and start trading with real money。

2.Select a currency pair to trade

As we mentioned before, if you are new to Forex trading, then major currency pairs are the best place to start。Major currency pairs are the most frequently traded and there are always plenty of trading opportunities。Skip cross currency pairs or exotic currency pairs, which are less actively traded and susceptible to price fluctuations。

3.decide to buy or sell

The next step is to decide whether to "buy" or "sell" based on the technical analysis of the market.。You will view historical price charts, use technical indicators and monitor the news and forex calendar for any economic announcements。Buy if you think the price will go up。Think it will fall and sell。

4.Add Order

The forex market is highly volatile and you need a plan to guide your entry and exit points and manage your risk。Orders are orders that are automatically traded at key "trigger points"。These triggers are usually set to a predetermined price level that you set。As a beginner, the most important things you need to remember are stop loss orders and take profit orders。

5.Monitor your transactions

Once the deal starts, it's time to wait。While it's possible to check open positions from time to time, don't fret about every tiny swing in profit or loss。I believe you have completed the relevant investigation and placed the correct order.。

6.Transaction Completion

Once your trade hits a stop loss or take profit order, the trade is officially completed。If you have not set up a take profit order, you need to monitor your trading and proceed with some technical analysis to understand what may happen next for your Forex currency pair。Not all trades bring profits, so don't be too upset if you fall short this time。

Advantages of Forex Trading

• Market size: The Forex market is the largest in the world, which means there are plenty of trading opportunities to take advantage of。
• No commissions: Most brokers make money through "spreads" rather than commissions。
• 24 / 5 Open: The Forex Market Never Sleeps。You can trade at any time and follow your own schedule。
• Leverage: You can "borrow" money from a broker, you can trade far beyond the funds actually deposited。
• High liquidity: there will always be people willing to trade。
• Risk-free demo accounts: Most brokers offer free demo accounts for practice。Before using your own money, learn how to use virtual currency。
• Profit from highs and lows: No matter where the market goes, you can profit if you have a reliable trading strategy。

Forex Trading Risk

• Leverage: With leverage, your losses are magnified - the larger the trade, the greater the potential loss。
• Volatility: While volatility can create trading opportunities, too much volatility makes it very difficult to judge the market。
• Overtrading: Being open 24 hours a day doesn't mean you should trade throughout the day, only a few "peak" hours are worth trading。
• DIY Learning: Success depends on your self-discipline and motivation to learn。
• Interest rates: When a country introduces a new interest rate, the value of the currency can change dramatically, depending on your buy / sell position。
• Brokers: It is important to find reputable, fully regulated brokers, unscrupulous brokers have opaque fee structures and can act as their own "market makers."。

Forex Trading Skills

Rome wasn't built in a day, and becoming a successful trader didn't happen overnight。It requires a lot of time, practice, patience and willingness to learn.。Here are some forex trading tips that can help you get started:

1. Learn the basics and practice: Take time to self-study before your first trade
2. Don't overcomplicate things: find a strategy that works for you and stick to it
3. Down to earth: not immediately profitable
4. Be patient: resist the temptation to fall into persistent price swings
5. Managing Risk: Never invest more than you can afford to lose
6. Choose wisely: choose a broker that is secure, transparent and fully regulated
7. Know your own style: Discover your unique trading style
8. Record the transaction log: Keep the transaction log and reflect on past mistakes
9. Keep learning: Lessons can be learned with every trade
10. Stay calm: control your emotions - don't trade when you feel uncomfortable