What liquid means in simple words, is how fast you can sell a product. It is that if you have more buyers and sellers in a market, you are likely to sell your product much faster. Buying and selling of stocks happen on the stock exchange. If you are looking to trade stocks, your trades will be processed through one of these stock exchanges.

So, it is a physical entity that facilitates the trading of shares to investors. Accordingly, the stock market is a centralized market , where the exchange is the center.

Unlike the stock market, the Forex exchange is a decentralized market. It is called the over-the-counter market OTC. That simply means that there is no physical exchange like the New York stock exchange or NASDAQ that fulfills the trades between traders. Instead, trading is done through a computer network with no centralized physical location. The Forex market is a network of multiple banks and financial firms that exchange currencies directly or indirectly.

At the highest levels, major banks trade directly with each other. These major banks are called the interbank market. At the next level, small-sized banks trade indirectly with major banks through an electronic brokerage service.

Next are the brokerage firms, hedge funds, and regular corporations. And finally, the retail Forex traders Individuals. For example, if a retail trader placed an order to buy euros at a broker, the broker passes this order to a bank at the higher level which has a sizable amount of euros.

The bank executes this transaction by selling the broker the euros, the broker then reflects that in my trading account. This happens instantly through trading software. Usually higher level firms like banks, provide lower-level firms or clients liquidity, and therefore they are called liquidity providers. The largest banks such as Citibank, JP Morgan, and HSBC to name a few, are the main liquidity providers in the market.

In Forex, you can trade mainly currencies. The value of one currency against another currency. Remember: Major and most traded currency pairs in the Forex market are the EURUSD, GBPUSD, USDJPY, USDCHF, USDCAD, AUDUSD and NZDUSD.

In the past decade, Forex brokers have expanded their offering to include other types of instruments. If you open a trading account with any good broker nowadays, you would be able to trade several types of products.

For example:. Forex trading tutorial hint: When you are ready to start trading, always look for brokers that have a wide variety of instruments. You never know where the opportunity resides. And here comes the role of a Forex brokerage firm. To be able to start trading, you must open a Forex account with a Forex broker.

The Forex market maker is a company that is always ready to buy or sell financial instruments and sets both the sell and the buy prices for their clients. They make transactions at these prices with their customers. If you want to sell, the Forex market maker will be the buyer and if you want to buy it will be the seller. Market makers must take the opposite side of your trade. Simply if you want to travel from the U. dollars at the same time. The first price is the selling price called Bid as well and the second one is the buying price.

The difference between the bid and ask prices is called the spread , and it goes to the Forex broker as a sort of commission on the trade. We will discuss price quotes later in this tutorial. ECN Forex brokers provide access to the inter-bank market by using an electronic system that passes prices from multiple liquidity providers to clients. Such as banks and market makers connected to this electronic communication network ECN.

ECN brokers provide the tightest spreads in the industry. An ECN broker usually charges a commission in addition to the spread on each trade made by clients. ECN stands for electronic communication network.

ECN is an electronic trading platform that hosts bids and offers from different buyers and sellers banks, investors, etc.. allowing the transaction between buyers and sellers without having a physical entity such as a stock exchange ln the middle. Hence the transactions are done electronically.

The largest and most knowns ECNs are EBS and Reuters. To trade Forex, you need to open an account with a broker. Then using their trading platform, you can start making trades. But, before opening a real account, a common and necessary practice among new Forex traders is to start trading using a demo account.

To open a demo account start by downloading the trading software. A widely used software to trade Forex is the MetaTrader platform. It is used by most Forex brokers. We will use MetaTrader software as our default trading platform for this tutorial. You can download it here. Go ahead and open the MT5 terminal if it is not already open.

The default window should be like this:. Those are the main elements that you need to know at this stage. A currency quote is simply the current live price of the currency. And it consists of two prices, the one on the left is the Sell or Bid price, which is the price that you will get if you sell the EURUSD.

The price on the right is the Buy or Ask price, which is the price that you will get if you buy the EURUSD. The first currency is called the base currency, and the second currency is called the quote currency. You always buy or sell the base currency. For example, If you decided to buy EURUSD then you bought the EUR and sold the USD.

If you decided to sell the EURJPY, then you sold to EUR to buy the JPY. Note: In the last example, the USD is not included in the pair. More examples of cross currency pairs are the GBPJPY and the NZDCHF. In Forex, a pip is the fourth decimal place of the price 0. If the price changed from 1.

For example, if the price changed from In recent years Forex brokers introduced a fifth decimal place for more precision. It is called a pipette. The fifth digit 1 is a pipette. If the price moved from 1. As a retail Forex trader, your starting capital is probably limited. Perhaps you have a few thousand to dedicate to trading. Note that, on average, a pair like the EURUSD can move pips in a single day.

It can move more or less depending on how active the trading day was. Now your investment is equal to:. So, you have just gained 10 dollars from this trade.

Trading euros in a period of two days has returned 10 dollars. This is a small amount and apparently not worth the time and effort you would dedicate and the risks associated with Forex trading. So basically, leverage in Forex is the ability to boost their trading capital. For example, what if the euros you used in the prior example turned to ,? multiplied by You gained dollars from this trade.

In the above example, our Forex trading leverage was Forex Brokers provide different leverage options for clients, you can choose to have up to leverage in some Forex brokers. Forex Trading Tutorial Hint: The bigger the leverage the bigger the risk. High leverage is not recommended. In Forex, a standard lot is worth , units of the base currency of the pair being traded.

A mini lot equal to 10, units and a micro lot 1, units. if the exchange rate is 1. S Dollars. Here comes the leverage. And this is called the Required Margin for your 1 lot trade or EURUSD. Accordingly, the higher the leverage you have the less amount of money you need to control one lot. We explained that you need 1, to control one lot of EURUSD if you have leverage. For leverage you need And so on. There are plenty of calculators available online here or here.

To get the value of one pip in a currency pair, we have to divide one pip in decimal form 0. The pip value for the EURUSD is 10 USD for every bought or sold , units one lot. Remember: If we apply that to all the currency pairs that have the USD as the Quote currency, like EURUSD, GBPUSD, AUDUSD, NZDUSD, etc. Otherwise, the pip value is variable. In this case, we do not need the last step of multiplying by the exchange rate, because the outcome is already in USD terms.

In the above case, where the USD is the base currency, pip value is not constant, it depends on the price of the pair. In this case, the GBP is the base currency and the JPY is the quote currency. So the result will be in GBPs. To get the value in USD, we have to convert the pounds to USD. So simple we multiply by the exchange rate of the GBPUSD:.

it is the amount of money that you have. The balance will change as you make trades. The balance will change from 10, to 10, This is how our account will look like the moment after we opened the trade.

the value of equity is always floating because the price keeps fluctuating. You already know that you close a buy order by a sell order. and this is a commission for the broker. Buying price at the time we executed our order was 1. The difference is 5 pipettes 0. dollar as a quote currency. We also explained that this depends on the leverage you choose and the volume of your trade in this case it is 1 lot of EURUSD and our leverage is The free margin is how much purchasing power you still have after this trade.

It is how much equity you have compared to the margin. This process is called a Margin call. Margin Level will only appear in the toolbox window of your MetaTrader if you have open orders. Remember: Different Forex brokers have different margin calls rules. You should ask the broker about their minimum margin level before opening an account. Market Order : A market order is executed immediately at the current market price Bid price for sell or Ask price for Buy.

Buy limit : It is an order that is pending. It is an order to buy at a price lower than the current price. The Buy limit order will be activated if the price reaches this preset price and the order becomes an active buy order. Use Case: You use the buy limit in case you think the price will eventually go higher, but you expect it to move lower before reversing higher. Sell Limit : It is an order that is pending, it is an order to sell at a price higher than the current price. The Sell limit order will be activated if the price reaches your preset price and the order becomes an active sell order.

Use Case: You use a sell limit in case you think the price will eventually go lower, but you expect it to move higher before reversing lower. Buy Stop : It is an order that is pending, it is an order to buy at a price higher than the current price.

The buy stop order will be activated if the price reaches your preset price and the order becomes an active buy order. Use Case: You use a buy stop in case you think the price will go high, but you need confirmation by witnessing the price rise to your specified level first. Sell Stop : It is an order that is pending, it is an order to sell at a price lower than the current price. The sell stop order will be activated if the price reaches your preset price and the order becomes an active sell order.

Use Case: just like the buy stop. You use a sell stop in case you think the price will go lower, but you need confirmation by witnessing the price fall to your specified level first.

Take Profit Order : A take-profit order automatically closes an open order when the exchange rate reaches the specified price. Stop Loss Order : A stop-loss order is a defensive mechanism. You can use it to protect gains or limit losses. Like the take profit, it also closes an open order when the price reaches the specified level.

Trailing Stop Order : This is a type of stop-loss order, but it is variable. It basically a stop loss that trails the price if the price move in the expected direction. Then if the price of gold reaches , the platform will automatically place a stop-loss order at If the price continues to move higher the stop will move with it.

So if the price reached , your stop will be at , and so on. Now if the price moves back reverses and moves back lower towards , your stop loss will be triggered and your trade will be closed at Assuming we bought the EURUSD at 1.

The trailing stop will keep moving higher along with the price until the price reaches the highest at 1. At that point, the stop loss will be at 1. Then the price failed to continue higher and reversed to touch our stop loss at 1.

Note: Traders have invented new terminology for the words buy and sell. For example, going long gold means buying gold. Rollover is a small percentage of interest that can be deducted or credited to your balance if you hold a position overnight.

Depending on the currency pair you are holding. What you need to know is that when you make a trade in the Forex market, you are simultaneously buying one currency and selling another.

Therefore, you must pay interest on the currency you sold and you will earn interest on the currency you bought. For example, if we assume that the interest rate in Australia is 2. and you have a buy position of 1 lot in AUDUSD at 0.

You will earn 2. So to calculate an approximate amount of what you will pay or gain on this trade we will do the following:. You sold USD in this case. So to get the amount you sold, simply multiply the position size by the exchange rate:. We subtract what we paid from what we gained. However, we have to convert the 5. However, in real life, this is not the case. In the Forex market, any positions that are open at or before 5 pm sharp are considered to be held overnight and are subject to rollover.

A position opened at pm is not subject to rollover until 5 pm the next day. UBS, JP Morgan, Citi, and Barclays are just a few names of large banks that exchange currencies in the forex market. Their purpose of participating varies from speculation investment banks to making the market to others.

We want that three to one reward to risk ratio. You got in the very bottom, which would be best case scenario and pretty much impossible; this will be even worse than we think. However, what happens, it does not break that high. In fact, it hits that high, this is now resistance. So you get the same resistance over here by the way. And I would say to you this — risk reward ratio and win loss ratio are inversely correlated.

This is why there are a lot of people who make money just scalping the market. Again, longer the time goes down, the less likely it is to continue because of all these different things that can happen between now and then that changes market sentiment. Because of that, getting a good reward to risk ratio consistently more than half the time is nearly impossible.

Just not really the statistics of how it works. So your win loss ratio will be lower if you insist on getting a great reward to risk ratio because those are inverse. If you just take a little scalp trade, then your win-loss ratio will be high, but reward to risk ratio will be low.

So what I do is I like to do a combination of the two. And I peel positions off. So what I will do is I will go ahead and lock in some profits up here. Not my whole position, but part of my position. So I took a few lots there long. It does two things. Number one, it does put some green in your wallet. Why does it reduce your risk? Now, your risk on the trade is only two lots where at the beginning of your trade, it was for last.

So you lock in some profits here. Now, maybe you only lose about an eighth of your original position. They do get it but less than half the time. Scalpers have a huge win-loss ratio, but a very small risk-reward ratio. I mean that seriously would be kind of ridiculous. But some people would put their stopped down here and that is where my initial stop would be.

You can think of it that way in this particular situation, but not only do we get that, then we also get an engulfing candlestick. So the reason that I would then take that short, or at least they release, I would get out here instead of getting out here.

Welcome to Forex Tutorial For Beginners basics guide. If you are new to Forex trading and willing to start learning, you have landed on the right page. This is a step-by-step Forex trading tutorial for newbies. This tutorial aims to provide all the necessary information to newcomers in one place. In this guide, we will explain the most basic definitions and concepts. The concepts you must know before you start learning how to analyze the markets, and make trades.

We will explain things like, what Forex trading is, and how trading works. Also, what is a Forex broker, and how to choose one. How to read the prices and much more. After completing this tutorial, you will be ready to start the intermediate-level tutorial. Which covers analysis and forecasting: Forex Technical Analysis Tutorial. We ask you to be patient while reading, especially in the beginning. If you feel that a topic is not clear keep going, it will be clearer by the end of the tutorial.

If you have any questions after completing, please drop them in the comments section. It is at the end of this page. Trading is the action of buying and selling a product, aiming to generate profit, over a short period of time.

And that is what makes trading different than investing. Investors usually hold their positions trades for a longer period, more than a year. A security is any tradable asset. Such as Microsoft shares, or the Euro currency, or commodities like oil or gold. In this Forex Trading tutorial for beginners , our main focus is the Forex market. The Forex market is where currency trading happens. Trading Forex allows you and me individual retail traders to speculate bet in the currencies market, also called the Forex market.

To be able to do so, we need to open a trading account with a Forex broker, then we can start buying or selling currencies, aiming to generate profits. In Forex, we simultaneously buy and sell currencies. Simply, just like if you want to travel from the U.

to Japan, you will go to the bank to exchange your dollars for the Japanese Yen. Simply, Forex Trading is exchanging a currency with another currency aiming to generate a profi t. In the USD and Japanese Yen example we just mentioned, since you exchanged your bucks for the Japanese yen, you would generate profit if the Japanese Yen rose in value against the U. After a couple of months, the exchange rate changed to 90 Yen for every U. S dollar.

Scalpers enter the market for seconds or a few minutes then exit. They buy a product and then sell it for a small profit.

And keep repeating the process This trading style is not recommended. Trading happens in the marketplace. Our focus in this Forex trading tutorial is the Forex market, also called Foreign Exchange, or FX. The Forex market is the largest financial market.

What liquid means in simple words, is how fast you can sell a product. It is that if you have more buyers and sellers in a market, you are likely to sell your product much faster. Buying and selling of stocks happen on the stock exchange. If you are looking to trade stocks, your trades will be processed through one of these stock exchanges. So, it is a physical entity that facilitates the trading of shares to investors. Accordingly, the stock market is a centralized market , where the exchange is the center.

Unlike the stock market, the Forex exchange is a decentralized market. It is called the over-the-counter market OTC. That simply means that there is no physical exchange like the New York stock exchange or NASDAQ that fulfills the trades between traders.

Instead, trading is done through a computer network with no centralized physical location. The Forex market is a network of multiple banks and financial firms that exchange currencies directly or indirectly. At the highest levels, major banks trade directly with each other. These major banks are called the interbank market. At the next level, small-sized banks trade indirectly with major banks through an electronic brokerage service. Next are the brokerage firms, hedge funds, and regular corporations.

And finally, the retail Forex traders Individuals. For example, if a retail trader placed an order to buy euros at a broker, the broker passes this order to a bank at the higher level which has a sizable amount of euros. The bank executes this transaction by selling the broker the euros, the broker then reflects that in my trading account. This happens instantly through trading software. Usually higher level firms like banks, provide lower-level firms or clients liquidity, and therefore they are called liquidity providers.

The largest banks such as Citibank, JP Morgan, and HSBC to name a few, are the main liquidity providers in the market. In Forex, you can trade mainly currencies.

The value of one currency against another currency. Remember: Major and most traded currency pairs in the Forex market are the EURUSD, GBPUSD, USDJPY, USDCHF, USDCAD, AUDUSD and NZDUSD. In the past decade, Forex brokers have expanded their offering to include other types of instruments. If you open a trading account with any good broker nowadays, you would be able to trade several types of products.

For example:. Forex trading tutorial hint: When you are ready to start trading, always look for brokers that have a wide variety of instruments. You never know where the opportunity resides. And here comes the role of a Forex brokerage firm. To be able to start trading, you must open a Forex account with a Forex broker.

The Forex market maker is a company that is always ready to buy or sell financial instruments and sets both the sell and the buy prices for their clients.

They make transactions at these prices with their customers. If you want to sell, the Forex market maker will be the buyer and if you want to buy it will be the seller.

Market makers must take the opposite side of your trade. Simply if you want to travel from the U. dollars at the same time. The first price is the selling price called Bid as well and the second one is the buying price.

The difference between the bid and ask prices is called the spread , and it goes to the Forex broker as a sort of commission on the trade. We will discuss price quotes later in this tutorial. ECN Forex brokers provide access to the inter-bank market by using an electronic system that passes prices from multiple liquidity providers to clients. Such as banks and market makers connected to this electronic communication network ECN.

ECN brokers provide the tightest spreads in the industry. An ECN broker usually charges a commission in addition to the spread on each trade made by clients. ECN stands for electronic communication network. ECN is an electronic trading platform that hosts bids and offers from different buyers and sellers banks, investors, etc.. allowing the transaction between buyers and sellers without having a physical entity such as a stock exchange ln the middle.

Hence the transactions are done electronically. The largest and most knowns ECNs are EBS and Reuters. To trade Forex, you need to open an account with a broker. Then using their trading platform, you can start making trades. But, before opening a real account, a common and necessary practice among new Forex traders is to start trading using a demo account. To open a demo account start by downloading the trading software. A widely used software to trade Forex is the MetaTrader platform.

It is used by most Forex brokers. We will use MetaTrader software as our default trading platform for this tutorial. You can download it here. Go ahead and open the MT5 terminal if it is not already open.

The default window should be like this:. Those are the main elements that you need to know at this stage. A currency quote is simply the current live price of the currency. And it consists of two prices, the one on the left is the Sell or Bid price, which is the price that you will get if you sell the EURUSD.

A mini lot equal to 10, units and a micro lot 1, units. dollar as a quote currency. If you feel that a topic is not clear keep going, it will be clearer by the end of the tutorial. It is called the over-the-counter market OTC. Forex trading tutorial hint: When you are ready to start trading, always look for brokers that have a wide variety of instruments. Deposits and Withdrawals.

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