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Making Forex trading easy to understand
Every country has its own currency. USA has US Dollar (USD), Britain has Pound (GBP), Switzerland got Swiss Franc (CHF), and then there is EURO, Japanese Yen (JPY), Canadian Dollar (CAD), and Australian Dollar (AUD). These are the major currencies in the world. We see the value of each currency changing every day in exchange of another currency. It might be in decimal but they always change. Just like your Girl friend’s mind about where you should have the tattoo to show your epic love.
Forex trading is all about trying to make profit in all those little changes in the exchange rates of various currencies with each other. We always trade in pairs in Forex trading. Major Forex trading pairs are EURO/USD, USD/CAD, GBP/USD, EURO/JPY, GBP/JPY, USD/CHF, EURO/GBP, and AUS/USD. So, if today 1 US$ is 1.3215 EURO, it would change may be to 1.3270 or 1.3180 or may be to some other price same day. This is our chance to make profit. Same with other currency pairs. The change may be in decimal but when combined with leverage it provides great opportunity to make good profit even with little changes in the exchange rate. We can close the trade same day, next day, after few days, weeks or even months. It depends on our trading system just like if we would be yelled at or being praised depends on our BOSS.
Example of a trade- The price we see in Forex Trading for various pairs is called a Pip. In Forex Market we make profit both in both rising and falling market provided we have placed our trade in the right direction. For rising market we can make profit by being in Buy deal, and in falling market we can make money by being in Sell deal.
Let’s see on a given trading day the exchange rate of EURO/USD is 1.3215/17. The difference of 2 pips here is the spread which we give to our Broker for giving us such a big trading platform, various trading tools to trade. It’s like giving the TV remote to the WIFE as her charge for keeping the home liveable. HAHA. The first rate in a pair is called Bid Price/Rate and the second rate is called Ask price/Rate.
Buy Deal Example- After our research we think EURO/USD would rise which means EURO would rise in exchange of USD. So, we place a Buy deal. We invested 100$ for this Buy deal. We bought it at 1.3217(Buy deals are opened at the Ask Price). We put 100 leverage for this deal. We can use from 5 to even 1000 leverage. But never one should go beyond 100 leverage. 50 and 100 are the best leverage size. But I have no clue about the best size of the Diamond Ring to keep your woman happy. No one has. So, 100$ Buy position at 100 leverage for EURO/USD means we bought 10,000 units (100$ multiply by 100 leverage). After few hours we saw the EURO/USD has reached 1.3250/52. We see ourselves at profit of 33 pips. We had bought EURO/USD at 1.3217 and now the Bid Price is 1.3250(Buy deals are closed at Bid price). That’s 33 pips profit and at 1$ per pip we are in 33$ profit. On an investment of 100$ we are making 33$ profit. No other business can provide this kind of return. So, we closed the trade and pocketed 33$ profit.
Let’s take a Sell deal example- EURO/USD is at 1.3215/17. Our Trading System says the pair would go down which means US Dollar would get stronger in comparison to the EURO. So, we sold EURO/USD pair and our booking price is 1.3215(Sell deal are booked at Bid Price). After few hours or next day we see the market indeed has fallen down. The price reads now EURO/USD 1.3170/72. So, we closed the deal at 1.3172(Sell deals are closed at Ask price). So, we made a profit of 43 pips. So, if we had put 100$ at 100 leverage that’s 1$ per pip. So, our total profit for this deal is 43$.
We can do the same with other Currency pairs too.
Types of Orders:
There are different kinds of Orders in Forex Trading.
Some important facts how Forex Works:
1- In a Forex Currency Pair, the first currency is called base currency; second one in the pair is called counter currency. In EURO/USD, EURO is base currency and USD is counter currency.
2- The price of a pair reads like this first one is called Bid Price and Second one called Ask Price. So, when EURO/USD reads 1.3215/17, here 1.3215 is the Bid Price and 1.3217 is the Ask price. The difference between the Bid and Ask price is the spread broker charges for providing us the trading platform and trading tools.
3-When the market is falling it means the counter currency is getting stronger than the base currency. Example- If EURO/USD fell down from 1.3210/12 to 1.3120/22 then US Dollar got stronger in comparison to the EURO,
4-When market is rising in price then it means the base currency is getting stronger than the counter currency. For example- If EURO/USD rose from 1.3100/02 to 13145/47 it means EURO currency got stronger in comparison to the US Dollar,
5-We place Sell deal to make profit in a falling market and we place Buy deal to make profit in a rising market,
6-Leverage is used to increase our trade unit size by multiple times than our actual investment amount to have bigger profit. Example- In a deal where 100$ is invested at 100 leverage we are operating 10,000 units (100$ multiplied by 100 leverage). For 100$ deal with 25 leverage it would be 2500 units.
7- When we are in a Buy deal if the market falls down then we are at loss. Similarly when we are having a Sell deal opened if the market rises up then also we are at loss. So, when to cut our loss and also when to capture our profit all depend on our trading system. The GOLDEN Rule is this- Always cut your loss short, and let your win run bigger. And always have at least 2:1 or more win and loss size for your trade. For every 1$ you might lose you should position yourself to win at least 2$ when the trade ends in profit.
Now, it’s safe to say you know more about how Forex trading works than Lady Gaga knows about make up.
Get free mentoring from a Professional Forex trading coach. Open a free Live Trading Account with our Regulated Broker by clicking the template below and get all the knoweldge and training to be a successful Forex trader for free. You would also get Free trading signals with buy and sell entry rates, stop-loss and take profit. All this for free with just a funded Live trading Account. We suggest 2,000$ and above deposit but one can start with even just 500$ to make profit in Forex.
Most of the times the best we could have done in our life was something we didn't even try owing to many excuses.
Disclaimer: Like any other business Forex Trading too comes with certain risk. One might lose money if not done properly. Never invest money you can’t afford to lose. That's the first rule for any business. Forex Trading is not suitable for everyone.
Making Forex trading easy to understand
Every country has its own currency. USA has US Dollar (USD), Britain has Pound (GBP), Switzerland got Swiss Franc (CHF), and then there is EURO, Japanese Yen (JPY), Canadian Dollar (CAD), and Australian Dollar (AUD). These are the major currencies in the world. We see the value of each currency changing every day in exchange of another currency. It might be in decimal but they always change. Just like your Girl friend’s mind about where you should have the tattoo to show your epic love.
Forex trading is all about trying to make profit in all those little changes in the exchange rates of various currencies with each other. We always trade in pairs in Forex trading. Major Forex trading pairs are EURO/USD, USD/CAD, GBP/USD, EURO/JPY, GBP/JPY, USD/CHF, EURO/GBP, and AUS/USD. So, if today 1 US$ is 1.3215 EURO, it would change may be to 1.3270 or 1.3180 or may be to some other price same day. This is our chance to make profit. Same with other currency pairs. The change may be in decimal but when combined with leverage it provides great opportunity to make good profit even with little changes in the exchange rate. We can close the trade same day, next day, after few days, weeks or even months. It depends on our trading system just like if we would be yelled at or being praised depends on our BOSS.
Example of a trade- The price we see in Forex Trading for various pairs is called a Pip. In Forex Market we make profit both in both rising and falling market provided we have placed our trade in the right direction. For rising market we can make profit by being in Buy deal, and in falling market we can make money by being in Sell deal.
Let’s see on a given trading day the exchange rate of EURO/USD is 1.3215/17. The difference of 2 pips here is the spread which we give to our Broker for giving us such a big trading platform, various trading tools to trade. It’s like giving the TV remote to the WIFE as her charge for keeping the home liveable. HAHA. The first rate in a pair is called Bid Price/Rate and the second rate is called Ask price/Rate.
Buy Deal Example- After our research we think EURO/USD would rise which means EURO would rise in exchange of USD. So, we place a Buy deal. We invested 100$ for this Buy deal. We bought it at 1.3217(Buy deals are opened at the Ask Price). We put 100 leverage for this deal. We can use from 5 to even 1000 leverage. But never one should go beyond 100 leverage. 50 and 100 are the best leverage size. But I have no clue about the best size of the Diamond Ring to keep your woman happy. No one has. So, 100$ Buy position at 100 leverage for EURO/USD means we bought 10,000 units (100$ multiply by 100 leverage). After few hours we saw the EURO/USD has reached 1.3250/52. We see ourselves at profit of 33 pips. We had bought EURO/USD at 1.3217 and now the Bid Price is 1.3250(Buy deals are closed at Bid price). That’s 33 pips profit and at 1$ per pip we are in 33$ profit. On an investment of 100$ we are making 33$ profit. No other business can provide this kind of return. So, we closed the trade and pocketed 33$ profit.
Let’s take a Sell deal example- EURO/USD is at 1.3215/17. Our Trading System says the pair would go down which means US Dollar would get stronger in comparison to the EURO. So, we sold EURO/USD pair and our booking price is 1.3215(Sell deal are booked at Bid Price). After few hours or next day we see the market indeed has fallen down. The price reads now EURO/USD 1.3170/72. So, we closed the deal at 1.3172(Sell deals are closed at Ask price). So, we made a profit of 43 pips. So, if we had put 100$ at 100 leverage that’s 1$ per pip. So, our total profit for this deal is 43$.
We can do the same with other Currency pairs too.
Types of Orders:
There are different kinds of Orders in Forex Trading.
Market Order- It’s
placing a Live Buy or Sell deal at the current Market price.
Pending Stop Order- It’s placing a future
Buy/Sell order after a certain movement in the same direction. Example- EURO/US
is 1.3230/32; we want to enter a Buy deal at 1.3270 means movement in the same
direction. So, we would place a Buy Stop at 1.3270. So, when the Ask price for
EURO/US reaches 1.3270 our Buy Stop order would be triggered by the trading
platform. Likewise if we want to place a Sell order when market reaches 1.3210,
again moving in the same direction then we can place a Sell Stop at 1.3210. So,
when the Bid Price for EURO/US reaches 1.3210 our Sell Stop order would get triggered
by the trading platform.
Pending Limit Order- It’s placing a
Buy/Sell order at a future rate in opposite direction. Example- EURO/US is
1.3250/52; you want to place a Buy deal at 1.3210. We place a Buy Limit order at
1.3210, and the market fell down to 1.3210 Ask price. So, our opposite
direction Buy Limit order gets triggered. Likewise we want to place a Sell deal at
1.3280. We place a Sell Limit order at 1.3280. The market rose to 1.3280 Bid
price. So our opposite direction Sell Limit order gets triggered.
Some important facts how Forex Works:
1- In a Forex Currency Pair, the first currency is called base currency; second one in the pair is called counter currency. In EURO/USD, EURO is base currency and USD is counter currency.
2- The price of a pair reads like this first one is called Bid Price and Second one called Ask Price. So, when EURO/USD reads 1.3215/17, here 1.3215 is the Bid Price and 1.3217 is the Ask price. The difference between the Bid and Ask price is the spread broker charges for providing us the trading platform and trading tools.
3-When the market is falling it means the counter currency is getting stronger than the base currency. Example- If EURO/USD fell down from 1.3210/12 to 1.3120/22 then US Dollar got stronger in comparison to the EURO,
4-When market is rising in price then it means the base currency is getting stronger than the counter currency. For example- If EURO/USD rose from 1.3100/02 to 13145/47 it means EURO currency got stronger in comparison to the US Dollar,
5-We place Sell deal to make profit in a falling market and we place Buy deal to make profit in a rising market,
6-Leverage is used to increase our trade unit size by multiple times than our actual investment amount to have bigger profit. Example- In a deal where 100$ is invested at 100 leverage we are operating 10,000 units (100$ multiplied by 100 leverage). For 100$ deal with 25 leverage it would be 2500 units.
7- When we are in a Buy deal if the market falls down then we are at loss. Similarly when we are having a Sell deal opened if the market rises up then also we are at loss. So, when to cut our loss and also when to capture our profit all depend on our trading system. The GOLDEN Rule is this- Always cut your loss short, and let your win run bigger. And always have at least 2:1 or more win and loss size for your trade. For every 1$ you might lose you should position yourself to win at least 2$ when the trade ends in profit.
Now, it’s safe to say you know more about how Forex trading works than Lady Gaga knows about make up.
Get free mentoring from a Professional Forex trading coach. Open a free Live Trading Account with our Regulated Broker by clicking the template below and get all the knoweldge and training to be a successful Forex trader for free. You would also get Free trading signals with buy and sell entry rates, stop-loss and take profit. All this for free with just a funded Live trading Account. We suggest 2,000$ and above deposit but one can start with even just 500$ to make profit in Forex.
Most of the times the best we could have done in our life was something we didn't even try owing to many excuses.
Disclaimer: Like any other business Forex Trading too comes with certain risk. One might lose money if not done properly. Never invest money you can’t afford to lose. That's the first rule for any business. Forex Trading is not suitable for everyone.
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