Beginners Guide to Forex Trading

There are three accounts for retail investors that make currency trading in the Forex (foreign exchange) market simple. These are micro lots, mini lots and the standard lot. The micro accounts allow you to start with an amount as small as fifty dollars. Forex market terminology is something that you should become familiar with prior to beginning but if you are already practicing online trading it should be simple.

 

Basics

 

Base currency: This is the first currency quoted in the currency pairs on forex. This is the accounting or domestic currency.

 

PIP: The smallest change in price that can be made by a given exchange rate. The last decimal is the smallest change since the major pairs of currency are traded four decimal places. The exception is the JPY (Japanese yen) which is quoted to second decimal.

 

Cross Currency Pair: This is a pair of currencies without the U.S. dollar being traded on the forex market. The currencies are traded for each other without the need to change them into American dollars first.

 

Currency pair: The comparison of one currency to another is what determines the value when it comes to the forex markets’ pricing and quotation structure. The base currency is listed first and the quote currency second. The pairs of currency show the amount of quote currency required to buy a single unit of base currency.

 

Quote currency: This is the second quoted currency in the forex pair. It is the foreign currency in a direct quote and the domestic currency in indirect quotes. This is referred to as the “counter” or “secondary currency.”

 

There are differences in the trading of currencies and stocks which should be looked at. Forex always quotes currency in pairs because they are always being compared to each other when trading currencies. F1 pro market When only the first part of the pair is quoted it is assumed the U.S. Dollar is the other currency being traded. The quote screen can seem confusing when you first look at it but it is really rather simple.

 

A EUR/USD quote shows the value of the euro in U.S. dollars. When selling or buying currency it is the first or base currency that it is being done to. For example a EUR/USD trade is the selling of euros to buy US dollars which is why the trading pair is set up that way. Selling the EUR/USD at 1.4022 and the value falls means the U.S. dollar is gaining value as the euro decreases in value. There are four places right of the decimal in the price being quoted; pips is what the quoting of currencies is done in. Pip refers to the unit of loss or profit that is being counted. There are four decimals used to quote most pairs of currency with the exception of the Japanese yen. Traders watch the one 100th of a cent (fourth decimal place) to count pips.

 

One pip of movement is a single point the quote moves. The value of the pip will vary depending on the size of the trade and trading currency as a result of whether the lot is micro, mini or standard. Increments of ten thousand are the most common lot size used for trading using the mini lot which is equal to $1 for a lot of 10,000. Talk to your broker, fxtrade 777  the best thing about currency trading is that there is not a commision to pay.

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