Learn How To Trade Currency

It’s great that you feel the enthusiasm for learning forex currency trading. FX trading is a craft like so many others. It is your zest and self-belief that will see you through the learning process. While the subject is indeed complex, you have to keep your aims and objectives firmly in sight. You will then feel the learning cascade over you like the water whilst a relaxing swim. 

We will be beginning with the basics. We shall then move over into technical points. Finally, a first demo account will set you on the road to FX freedom!

What Are Base And Course Currencies?

The currency rates are construed as base and price currency. The first currency being the base currency, the quote currency is the second currency. The current price indicates the amount of currency you would need to purchase a unit of the base currency. For instance, when you spot a price of 1.1024 in the pair EURUSD, a euro is valued at 1.1024. In this case, in order to purchase a euro, you would be required to sell 1.1024 dollars. 

What Is A Long Or Short Position Trade?

Long is the position where the trader is advantaged by an appreciation in the financial instrument’s value. When you decide to go long on the EURUSD, you bet on strengthening the euro, or conversely, in a dollar depreciation. In the best scenario, both factors work together for you. On the other hand, short position holders speculate on the opposite. 

What Is A Forex Pip, And How Is It Calculated?

A forex pip denotes the price change in a currency pair. This takes place at the fourth decimal place. Generally, a pip corresponds to a 0.0001 price change. Forex changes calibrated up to five decimal places are known as pipettes. In the case of the Japanese Yen, a pip could mean a 0.01 change. 

What Are Lots?

Lot is a staple of special forex contracts. A standard lot is equal to 100,000 base currency units. A mini lot is, on the other hand, 10,000 units. Moreover, 1,000 unit-strong lots, named micro-lots, are especially good for the beginner.

 How To Calculate The Position Size

The position size stands for a much in FX trading. When you get down to determining the lot size, you must calculate your maximum planned loss. Therefore the stop course is generally the distance between the exit and entry course. On knowing the risk for each position, you can easily find your position size on the basis of the risk per trade impacting your total capital. 

What Is A Lever?

The broker provides the borrowing capital so that the trading starts. When you have a lever of 100:1, you need to have 1% of moving capital physically in the account. Here we factor in the margin principle. This means you, as a trader have to own a minor portion of the actual position strength. Low initial capital is hence a hallmark of forex trading. It is definitely a truism that you can trade FX effectively with very little money. 

How Does The Lever Work?             

The benchmark in forex trading is a minimum of 50:1. It can, however, be considerably higher. A loan is obtained when 99 euros are placed by the broker on the stake, the initial stake being 1 euro. 10,000 euros may be shifted with 100 euros of capital when there’s a leverage of 1:100. Very little capital is tied to large position size accounts. It is the best. Moreover, that position variables be fixed to the planned maximum loss in advance, rather than to the capital criterion. 

What Is A Margin Call And A Stop Out?                 

You come across a mini lot when you shift 10,000 euros of a EURUSD position. The capital invested is 100 euros. Had just 200 euros been paid, just 100 euros would be freely accessible at the account to deal with price developments. 

When this position develops by 50 pip to the trader’s disadvantage, the amount freely accessible at the account is just 50 euros. The broker now shifts the gears in order to prevent the account from entering a minus zone. 

You might be warned with respect to paying in new capital or shutting the position close. It is here that a stop out could be effected at a certain level of freely accessible capital in the event of a rapid escalation. Beginning with the closing of the largest loss positions, the broker initiates stop loss. 

Even novice traders are thus shielded, even those who do not use stops on their own. 

Demo Account

Demo accounts come in very handy just because of such simulations. No wonder these are something you cannot do without!

Where Is FX Trading Costly?

There are cots that are incurred at various points in your FX trading journey. Mainly because of the spread, which is merely the difference between selling and buying priers. This spread fluctuates betwixt 1 and 1.6 pip for the majority of brokers. However, at this stage, no further direct trading costs are accretion. This is in stark contrast to brokers that forward customer orders straight to affiliated banks. In this scenario, the spread is much lower. 

All the common holding costs in case positions are held overnight till the next trading day. These are also known as swaps or financing costs. These differ here and there, but considerably. There is plenty of reason these be included in the right broker’s research, depending on the strategy. 

Costs impacting custody account management or the trading platform are exempted. Moreover, the real-time FX data is freely available with your broker. 

Trend-Following Strategies In Fx Trading

Trend following strategies is premised on the fact that existing trends are more likely to go on rather than the occurrence of a trend reversal. 

You have to find out a downward or upward trend attached to the greatest possible significance. This can be realised through trend lines or even trend-follow indicators. 

The more oftentimes a trend line has been tested in the past, the more significant it is. Older trends are more important than recent ones. Consequently, there’s a clash of aims betwixt early entry and high hit rate. This is true when, rather than trend lines, trend-following indicators are employed in order to define trading signals. 

For instance, on the intact continuing of a trend post-consolidation, a trading signal may well be triggered. 

Swing Trading In Fx Trading

On trading signals being defined visually, there’s the generation of a purchase signal in a higher-level uptrend. This is particularly true when the market moves close to the uptrend line. Also, there’s an utter absence of a break in the trend line.

What any forex trading strategy must accomplish     

Regardless of the opted for approach, any FX trading strategy should meet risk and money management expectations primarily on the basis of leverage. Hence it is that the requirements for position sizing, as well as loss limitation, are indubitably part and parcel of each and every strategy. 

The bet per trade is calculated once the position sizes are determined. Also, the extent to which capital per trade may be lost follows the determination of loss limit by stop loss. For instance, it may be pointed out that the stake for each position should not exceed 1% of the account balance. Also, the maximum loss for each position must not be more than 0.10% of the account balance. 

Conclusion 

Forex trading rewards diligent studying. Simple platforms, easy processes. You can actually start trading forex on the day of the opening account itself. You don’t have to be hungry like the Wolves of Wall Street – but it certainly helps! We recommend T1markets, Global TradeATF, ROinvesting, 101investing, PrimeFin, Brokereo, HFTrading, ETFinance ABinvesting, Capixal and  InvestLite.