The Complete Beginner’s Guide to Online Forex Trading – Chapter 1: What is Forex?

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Updated: Mar 5, 2019, 13:14 GMT+00:00

Forex is short for Foreign Exchange and deals with foreign currency which is usually sold in pairs. Currency pairs include the following currencies: USD,

The Complete Beginner’s Guide to Online Forex Trading – Chapter 1: What is Forex?

Forex is short for Foreign Exchange and deals with foreign currency which is usually sold in pairs. Currency pairs include the following currencies: USD, EUR, JPY, GBP, CHF, CAD, AUD and NZD. Translated this is the American dollar, the euro, the Japanese yen, the Great Britain Pound, the Swiss Franc, Canadian dollar, Australian dollar and New Zealand dollar. Each of these can be traded in pairs ie. one bought one sold. The Forex market is the biggest and most popular financial market in the world. Here are some things that you need to know as far as why Forex is so popular.

You have no middlemen; therefore you trade with the market directly. There is no fixed lot that you have to either buy or sell. You have a 24 hour market that cannot be cornered as well as low transaction costs and leverage. You can also open a Forex account such as a mini which requires a minimum of at least 100 dollars. The only tools that you will need are simply a computer, this guide and high speed internet to trade Forex in the market.

Reading a currency quote is easy when looking at the Forex quote. It is usually listed as base currency/counter currency. For example: JPY/USD; Therefore the JPY or Japanese Yen is the base currency. If you are buying the Dollar (on the right side), you need the unit of the counter currency in order to buy a unit of the base. The base is what you are selling. This is the basis for buying or selling. After choosing the pair, you will need to decide whether to sell or buy.

If you go SHORT, then you are selling the currency pair. If you go LONG you are buying the currency pair. There are several spreads that you may need to know about such as Bid/Ask spread which simply means that the ask price is what the dealer will sell the base in order to get the quote. The bid means the price the purchaser will buy the base at, for exchange with the quote. Some examples will be USD/GBP or JPY/AUS. Both of these are in the same quote family and the first currency is the buy currency. The other is the sell currency.

This is just a short list that will introduce you to the Forex world and help you with basic knowledge that you need to have in order to understand basic concepts of Forex and be familiarized with those same concepts.

This guide will take you though the basics of Forex and will show you that although risky the Forex market is very simple to understand.

This is chapter number 1 out of 17. Read the rest: