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What is forex


Jane

Forex is a portmanteau of foreign currency and exchange. Foreign exchange is the process of changing one currency into another for a variety of reasons, usually for commerce, trading, or tourism. According to a 2019 triennial report from the Bank for International Settlements (a global bank for national central banks), the daily trading volume for forex reached $6.6 trillion in April 2019.1


What Is A forex Broker


Anyone can trade on Forex, but it is only accessible through mediators called brokers. Basically, broker is your “hands” on Forex which provides you with the access to the market.


How to make money on Forex?


People would buy a currency pair at a lower price and sell it at a higher price, and their income is the difference between the Buy and the Sell price. Broker gets a tiny commission from your trades called Spread.

For example: Let’s assume that you have $100 on your trading account and want to trade EUR/USD. Its exchange rate is 1.25, which means that for 1 euro you get 1.25 US dollars. Exchange rate is like a price tag at the grocery store – the only difference is that the price tags on Forex are changing all the time. Then, you make a forecast – for example, you believe that Euro will rise versus the US Dollar. Next, you buy 80 euros for your $100 and wait for the exchange rate to change. Let’s imagine it rose from 1.25 to 1.35 – it is a profitable situation for you, so you can close the trade at this point. Now, you can exchange your 80 euros back to 108 dollars, and get your profit of $8. If you think this amount of money isn’t worth bothering, there’s great news: your broker can help you make much more money with a special tool called leverage. Leverage is funds you borrow from your broker to multiply your deposit. For example, if you used the leverage of 1: 3000 at FBS for a similar trade from the previous example, you would get $2400 with just one trade. So, you invest $100 and trade $300 000! Not bad, right? Just remember: higher profit involves higher risk, so risk management is an important part of trading!


how To Make Forecast

The last question is: how do traders know what currency pairs to trade and when to buy or sell them? Currency rate depends on its supply and demand, which may change depending on the economic situation of the country (GDP, inflation, the labor market situation, etc.). This is why political, economic and social phenomena that influence local economy also influence currency rates. Learning HOW these factors influence profitability is the key to Forex trading. There are 2 major tools that indicate the best moment to buy or sell.



What is Currency Pair

Jane

Currencies on the market are traded in pairs – for example, the euro and the U.S. dollar (EUR/USD).
Want to buy Euro for dollars? Open the EUR/USD trade and press “Buy”. Want to buy dollars for Euro? Do the same and choose “Sell”.
It’s simple, just remember that your action always refers to the first currency of the pair.


What type Of traders do we have?

  • FUNDAMENTAL TRADERS

  • TECHNICAL ANALYSIS TRADERS


    • Fundamental Analsis trader(FA)


    is a trader who takes the market predictions using high impact news which covers economical, geopolitical or currency policies of a given country.
    FA will analyse the data of a given country and judge based on what gives impact to the currency no matter how small or big

    Technical Analysis Trader(TA)

    is a trader who predicts the market using chart analysis like taking price action in the area or using specific indicators like supply and demand (S&D), support and resistance(S&R), trendline(TL), moving Average e.t.c. TA will only analyze a chart based on price action pattern, candlesticks, or with the help of indicators readily available on the trading platform.The technical analysis trader is divided into 3 parts:
  • Scalper Trader: in general, scalpers alwasy takes small profit in short period and smaler pips if compared to other traders. scalpers usually take profit in less than 2 hours, within pip cunt of 15-50pips.
  • Intraday Traders: these traders will leave their posiion running less than 24 hours in a day. Before the close their total pips target is usually from 50-100 pips.
  • Swing Traders: These are the most experienced traders and they leave their position for a long time. It might be weekly, monthly or even yearly. In executing a swing position, a trader must have a high level of patient to wait for the best setup to enter. Total pips targeted is usually 100pips and above.

    so check yourself and try to identify which trading section you belong to




    • support and Resistance

    Jane

    Support: This is where we find buy because support is a level where demand is high causing the price to stop from falling.

    Resistance: this is where we find sellers, as it is a level where traders sell the currency causing the prioce not to go higher from the level of resistance.


    There are 2 types of support and resistance.

  • strong support
  • strong resistance
  • weak support
  • weak resistance.

    • support and resisitance can also change if there happens to be a breakout(BO).

  • in support breakout, support becomes a resistance.

  • In resistance breakout, resistance becomes support

    • Differences between a forex trader and a stock trader

    :

  • Forex Trading:

    its a 2 way trade(sell & buy). 2: you can buy or sell anytime you wnat

  • Stock Trading:

    Limited amount of traders. 2: one way trades (BUY ONLY).

    • When to trade Forex:
    1: 24 hours a day. 2: from monday to friday. 3:opening and closing of market depends on respective brokers.

    important words to know.

    1:MM = money management.
    2: PO = peding order.
    3: SNR = support and Resistance
    4: SND = supply and demand.
    5: TL = Trendline.
    6: TP = take profit.
    7: SL = stop loss.
    8: BE = breakeven.
    9: CL: cut loss.
    10:layer = Re-entry.
    11: MC = margin call