Forex trading for beginners

   Over the course of the next few minutes we're going to go through some of the basics of the foreign exchange market how it works how people trade it and what makes currency pairs move so in this latest topic with trading two and two what i thought we'd do is take maybe something of a step b Over ack now i appreciate plenty of people are quite familiar with foreign exchange trading but for some people it might be a new thing so we'll do a few minutes just explaining how this market works.

    When you're trading what you're actually trading and what makes currency pairs move now first of all for an exchange market.

    It's the biggest market in the world bar none it trades trillions of dollars a day around the clock so it appeals to both traders who are trading small size and larger size because it's relatively easy to get your trades filled and the cost of doing business uh is much lower when compared to other markets with currency markets no currency moves in isolation so we have the idea of currency pairs uh one currency quoted against another so to make sense of this let's take a quick look on the platform so we're on the trading two on two platform let's uh click the search tool up here top left and see what's available to trade let's click on currencies now so here's the list of various currencies australian dollar canadian dollar swiss franc czech corona and so it goes on so there are potentially hundreds of permutations we could trade for example if we go down to here the pln polish lottie if you wanted to you could take a view on the polish lottie against a japanese yen polish lottie against the mexican pesos there are all sorts of combinations you can do here what most people tend to do in the beginning at least is stick to the major markets that the major currency pairs because there's normally plenty going on in those markets and with trading 212.

   If you're trading 25 000 units or less you can trade these with zero spread so let me just highlight these by typing in zero at the top so there we go the most popular market euro dollar then we have the other majors dollar japanese yen pound us dollar and the dollar against the swiss franc so when we're looking at currencies and currency pairs it's all about relative value is one currency stronger or weaker than another currency and to get an idea of this let's take a look at how one currency pair has moved over recent months so all a currency pair is showing is the relative value of one currency versus another so if we're looking here in this example pound US dollar we can see at the beginning of 2017 so january 2017 one pound would buy you around about one dollar and 22 cents at the beginning of september the pound had risen in value and one pound would buy you one dollar and almost 32 cents so when we're when we're looking at forex pairs for exchange trading.

 We're looking at the value of one currency versus another now because we have currency pairs I think it can be a bit confusing in the beginning for some people when they click and they buy dollar yen what am I buying am I saying the dollar is going to go up am i saying the yen's going to go up it's understandable why this is confusing to some but it's really easy think to understand so again let's take a quick look on the platform to understand when we're trading what direction are we actually trading in when it comes to directional trading.

  It's really easy like i said it can be a bit confusing for people in the beginning but the way to remember if you buy pound us dollar it's the first quoted currency in the currency pair that you're buying and selling buying or selling so if i buy pound us dollar i'm speculating that the pound is going to go up means this chart is going to go up and correspondingly the us dollar is going to fall so the pound's value is going to increase against the US dollar so for example if i'd bought down here bought pound us dollar at the beginning of the year and we're still holding the position i'd be sitting on a reasonable profit if I thought the pound had gone up too far and i think like the market's going to fall how do i profit from this or how do I try and profit from this the way to do it i would click on sell I would sell pound uh against the US dollar so I m speculating the value of the pound is going to drop and this chart is going to turn lower okay so that's the that's the rule of thumb when you're buying or selling it's the first quoted currency that you're buying or selling against the other one so if we sold the dollar against the japanese yen we're speculating that dollar yen is going to fall so the dollar is going to fall and the yen is correspondingly going to rise when it comes to trading hours.

  Foreign exchange market is a true 24 hour market so it starts off sunday night uk time uh when the asian markets open for business and it trades all the way around the clock till friday evening when new york finishes off the weekend then on sunday the whole thing starts again um but you don't need to be intimidated  or worried by this 24-hour market let's take a look at some of the moves that we see and how we might want to trade it here's a snapshot of a few days pounding against the dollar where each of these candlesticks represents 10 minutes worth of trading so going back to the 5th of september and ending up at the end of that particular week on the 8th of september so we can see you can see from the scale just down here that this is a 24 market for example this section here we've got from 11 o'clock UK time asian trading kicks in the market moves higher then we have sort of seven to eight in the morning UK time.

    When the focus shifts to to europe and the market continues to rise in this example and then we have us time so from about five six o'clock in the evening UK time the focus is very much on the U.S and we had something of a quiet finish but but don't be think worried about this being a 24-hour market you know thanks to stop losses and take profit orders you can set up uh your trade so if a certain level gets hit you come out fo a small loss or you come out for the profit you're expecting just because it's a 24-hour market you don't need to watch these markets around the clock sitting there in your pajamas with matchsticks holding your eyes open you know you can use orders to manage the risk for you when you're trading foreign exchange like so many other products these days you're trading using leverage so even though you might have let's say a hundred thousand dollar position in one currency you don't actually tie up the whole amount because traditionally currencies don't move that much during the day you're trading using leverage so you may only have to put up half a percent or one percent value of the position so you have a situation where a small sum of money can control a much bigger financial position of course that gives you the potential for for greater profits but hand in hand with that goes the risk of bigger losses which is why it's important.

    I think to manage the risk using stop losses and we've done plenty of topics about how you might want to use stop losses the last thing we might want to look at is what moves foreign exchange payers the short answer and maybe not too helpful is potentially everything can have an impact on the currency markets you know from things like interest rates for example if the interest rates in one country are higher than the interest rates in another country that can make that currency appealing but hand-in-hand with that sometimes higher interest rates mean uh maybe a weaker economy so that can make money flow the other way things like unemployment numbers have an impact as well and as we've seen you know in the past sort of 12 to 18 months political events can have an impact the great example of that is the pound you know we've seen the pound very volatile since the referendum vote in june 2016. So all of these things can come together and affect the foreign exchange markets so that's it that's it that's a brief introduction to some of the basic mechanics of foreign exchange to an end i hope you found it useful and I hope you have a good trading week.

Thank you for read this article.