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Forex Trading: Everything on Forex Trading for Beginners

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There are a lot of new ways to make money nowadays. Some people invest their money in crypto-currencies, while others trade stocks. But they forget about foreign exchange or forex, in this world that’s governed by currency.
You might be asking, “What is Forex?” “How can I begin doing foreign exchange?” and other related questions. Well, this is because you are interested in Forex, but you don’t know enough about Forex. This guide on Forex Trading for Beginners is for you. So, keep reading.

What is Forex?

Forex is an abbreviation of the term “Foreign Exchange.” You can call it any name you choose as they both refer to the same thing. Foreign Exchange has to do with buying and selling world currencies in a place known as the Forex Market.

The Forex market is an international market where traders, investors, institutions, and banks meet to exchange, deliberate on, purchase, and sell currencies. The activity done in this market is called Trading. And trading is conducted on an online channel where currencies are traded 24hours daily, five days a week. This online channel is called Interbank. The Forex market is relatively large. It boasts of being one of the largest global financial markets with a daily profit of over 5 trillion USD.

Trading on Forex involves the buying and selling of 2 currencies, which are referred to as currency pairs. There must be a pair between two currencies for trading to occur. Pairing is carried out with a base currency and quote currency. The base currency is the first currency that shows in a forex pair. While quote currency is the second one for which the base currency is bought/sold in the exchange.

The EUR/USD pair is one of the most traded currency pairs in the forex market.
Now, you might want to know what the other most traded currency pairs are. Continue reading to find out.

What Currency Pairs are the Most Traded?
Currency pairs are grouped into three, which includes:

  • Major currency pairs
  • Cross currency pairs
  • Exotic currency pairs.

1. Major currency pairs

are the most commonly traded currencies in the forex market. 80% of the profits made in the forex market is due to these significant currency pairs. There are 7 major currency pairs, and they are linked to stable, well-managed economies. Examples of these pairs are:

  1. EUR/USD
  2. USD/JPY
  3. GBP/USD
  4. USD/CHF
  5. AUD/USD
  6. USD/CAD
  7. NZD/USD

{EUR- Euro, USD- US Dollar, JPY- Japanese Yen, GBP- British Pound, CHF- Swiss Franc, AUD- Australian Dollar, CAD- Canadian Dollar, NZD- New Zealand Dollar}

2. Cross currency pairs

These are currency pairs that don’t include the US dollar. Examples include:

  • EUR/GBP
  • EUR/JPY
  • GBP/JPY
  • CAD/CHF
  • NZD/JPY
  • AUD/JPY

Cross currencies pairs are more prone to a sudden change in price than major currency pairs, and they are less liquid.

3. Exotic currency pairs

These are paring of smaller currencies (of smaller economies) with a major currency. This kind of trade is hazardous, because the currencies of smaller economies are prone to rapid change, manipulation, and they are less liquid. Smaller economies have currencies that change with the tides of politics, economy, etc. Examples of exotic currency pairs include:

  1. GBP/NOK
  2. USP/MXN
  3. GBP/DKK
  4. CHF/NOK
  5. EUR/TRY
  6. USD/TRY

{MXN- Mexican Peso, NOK- Norwegian Krone, DKK- Danish Krone, TRY- Turkish Lira}

Forex Trading for Beginners
Forex Trading for Beginners

Useful Forex Trading Terminologies

Before you begin trading Forex, you have to know some terms and terminologies used during trading. So, continue reading to discover them.

  1. Position: This means that a grad is in progress.
  2. Long position: This means that a trader expects an increment in the value of a currency.
  3. Short position: mean that a trader expects a decrease in the value of a currency.

Forex Charts

Trading is done by studying charts, and understanding forex charts are vital for you to become a forex trader.

What are Forex Charts?
Forex charts are the usual charts you know about, but they are grouped into three types. You might not have heard of the Candlestick chart before now. Well, continue reading to know more about these three forex charts.

Types of Forex Charts

1. Candlestick Chart

Also referred to as the Japanese Candlestick Chart, the candlestick chart is preferred by most traders because it is more detailed. The Candlestick chart shows the high, low, opening, and closing prices during a trade.
A candlestick chart has open, close, and wick points.

2. Bar Chart

The bat chart also displays the opening, close, high, and low prices during a trade.
It is used mostly to determine the decrease and increase of price ranges.

3. Line Chart

As you are a beginner, I will recommend the line chart for your usage in determining prices during a trade. This chart is simple, and it shows a line drawn from one point to another. It can be used to identify the price fluctuation of a currency over time.


Forex Brokers

We’re not done yet. For you to go into Forex as a beginner, you need a forex broker.

What is a Forex Broker?
A forex broker is a firm that gives forex traders accessibility to a platform where they can buy and sell crypto-currencies.
Examples of some popular forex brokers are:

  1. IG.
  2. OANDA.
  3. London Capital Group (LCG).
  4. Pepperstone.
  5. X-Trade Brokers (XTB).
  6. Forex.com
  7. CMC Markets.

The Bottom Line

This everything guide on forex trading for beginners is equipped with points for you to learn several key points about forex. I hope you took note of them. If you did, then you can begin your journey into the Forex world. Go, make that money!

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