Basics of trading currency

Written by Raul Lopez on July 15, Posted in New to Forex. Before adventuring in the Forex market we need to make sure we understand the basics: Or, what are the basics of Forex Trading?

This is what this article is aimed to, to understand the basics of currency trading. The instrument traded by Forex traders and investors are currency pairs.

The Basics Of Currency Trading

A currency pair is the exchange rate of one currency over another. The most traded currency pairs are:. So, for instance, if a trader goes long or buys the Euro EURUSD , she or he is simultaneously buying the EUR and selling the USD. If the same trader goes short or sells the Aussie AUDUSD , she or he is simultaneously selling the AUD and buying the USD. The first currency of each currency pair is referred as the base currency, while second currency is referred as the counter or quote currency.

Each currency pair is expressed in units of the counter currency needed to get one unit of the base currency.

All currency pairs are commonly quoted with a bid and ask price. The bid always lower than the ask is the price your broker is willing to buy at, thus the trader should sell at this price. The ask is the price your broker is willing to sell at, thus the trader should buy at this price. A pip is the minimum incremental move a currency pair can make. Pip stands for price interest point. In contrast with other financial markets where you require the full deposit of the amount traded, in the Forex market you require only a margin deposit.

The rest will be granted by your broker. The leverage provided by some brokers goes up to Most brokers offer Of course it is not recommended to open a position with such limited funds in our trading balance.

If the trade goes against our trader, the position is to be closed by the broker.

This takes us to our next important term. The trader, after an extensive analysis, decides there is a higher probability of the British pound will go up. The trader decides to go long risking 30 pips and having a target reward of 60 pips.

The actual quote for the pound is 1. Our trader goes long at 1.

What Are the Basics of Currency Trading?

By the time the market reaches either our target called take profit order or our risk point called stop loss level we will have to sell it at the bid price the price our broker is willing to buy our position back.

In order to make 60 pips, our take profit level should be placed at 1.

If our target gets hit, the market ran 64 pips 60 pips plus the 4 pip spread. If our stop loss level is hit, the market ran 26 26 pips plus the 4 pip spread equals 30 pips pips against us. Start first from the very basic concepts, then move on to more complex issues such as Forex trading systems, trading psychology, trade and risk management, and so on.

And make sure you master every single aspect before adventuring in a live trading account. Home Community Coaching Blog Education About Contact. Understanding the Basics of Currency Trading Written by Raul Lopez on July 15, Investors and traders around the world see the Forex market as a new speculation opportunity.

What is traded in the Forex market? The most traded currency pairs are: Margin Trading leverage In contrast with other financial markets where you require the full deposit of the amount traded, in the Forex market you require only a margin deposit.

Forex Trading Basics (learn forex online)

Most of the time margin calls occur when money management is not properly applied. The mechanics of a Currency Trading The trader, after an extensive analysis, decides there is a higher probability of the British pound will go up. Raul Lopez I've been trading the markets for more than 15 years. I believe the best way to trade is by adapting to the market conditions. You can learn it too, join our community. Recent Articles Is it about time to start trading Bitcoin? Free Education Free Courses.

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