Forex trading for the uninitiated – Forbes Advisor UK

Foreign exchange trading, often abbreviated as ‘forex’, or ‘FX’ trading, is really about buying and selling currencies.

At a simple level, it is Brits who exchange pounds for foreign currency at the exchange office, bank, Post Office or courier before leaving on vacation abroad doing forex trading. Forex traders do the same thing, but on a larger scale.

The advent of technology is a market that offers great opportunities, for people with the right skills, to personal investors and entrepreneurs. Here’s an in -depth look at forex and the key factors to keep in mind.

What is forex trading?

Forex trading involves buying and selling currencies in order to make money. It can be used to ‘hold’ existing financial relationships against a backdrop of exchange rates. (Hedging is where you hedge a financial position against the possibility of making a loss.)

Turning out a few hundred pounds of retirement savings may not be important to any of us. But FX is not only the largest market in the world, it is also the most powerful trader.

The numbers are an eye -opener. According to a three -year (three -year) report from the Bank for International Settlements, the global forex market will sell $ 6.6 trillion per day in 2019. To put that amount into context, more more than double the size of the UK’s domestic product. the measure of the total goods and services of the country).

Open at all hours

Independent retail stores, such as those in London, Frankfurt and Hong Kong, each operate specific opening hours and so the start -up ends in style.

In comparison, forex is an around -the -clock market with four major trading centers operating in different time zones: London, New York, Tokyo and Sydney. When you finish trading in one place, the forex market will continue in another. Forex is also traded in Zurich, Frankfurt, Hong Kong, Singapore and Paris.

Unlike a vacationer who wants foreign notes and coins to pay for food at the pool, forex traders don’t have to take the physical transfer of money.

The majority of forex trading is done between professional traders working on the side of individuals, banks and other financial institutions, as well as multinational corporations.

In addition to the internet, companies and investors can play the forex market. Time has passed, but private investors have created a small segment of the forex market.

Why buy forex?

Forex is taken for many reasons, for example, to protect the world’s currency and make money. This is an issue right now, as the global economy is struggling with inflation concerns and where percentage levels are being monitored.

Forex is also used to consider the impact of geo-political events such as the escalation of tensions between Russia and the West over Ukraine. Political events and natural disasters can dramatically change a country’s financial strength, leading to either gain or loss.

Businesses also use forex. For example, a multinational head in one location could use the forex market to avoid financial crisis due to the actions taken by companies around the world.

Forex is another factor that provides the difference in an investment portfolio. Because the forex market is open 24 hours a day, five days a week, it gives traders time to respond to news that can’t hurt anyone’s price. Land until the future.

The economic indicators used to monitor the forex market:

  • uku panee
  • increase revenue
  • the balance of the land’s wages and its economic policies
  • the government’s attitude towards entering the financial markets.

Forex trading is done ‘over the counter’ (OTC), which means there is no physical exchange of the underlying currency. A global network of banks and other financial institutions monitors the market.

In the past, people with no way to directly sell to the customer may have used to trade money for them. But thanks to the advancement of technology, the growth of smartphones and a plethora of online marketing platforms, it is now possible to trade money directly as a person.

Note: whether or not you think about forex trading based on your financial situation and market knowledge and your interest in risk. As with any marketing strategy, there is always the possibility that customers will oppose you and you will lose money as a result.

How does forex work?

The main goal of forex trading is to predict whether the value of one currency will increase or decrease against another.

A trader can buy money with the expectation that his wealth will increase with the intention of selling with the intention of earning money. This is known as ‘going long’. Or a trader may not be able to sell the currency today on the grounds that the asset can be reduced tomorrow and sold again at a lower price. This is known as ‘going short’.

How the coins are sold

Every currency of the world has a three -word code. This is similar to the signals used in stock markets to identify a specific company, such as DGE for Diageo in the London market.

The most traded currency in the world is the US, which has the USD ticker. The second most popular is the euro (EUR), followed by the Japanese Yen (JPY), the British pound (GBP), the Australian currency (AUD), the Canadian currency (CAD), the Swiss franc ( CHF) and the New Zealand currency. (NZD). There are over 170 dollars worldwide.

In forex, currencies are always traded as ‘fixed currencies’. This is because when you buy one currency, you sell another.

Financial institutions are known as ‘majors’ and account for about three -quarters of trading in the forex market:


‘Minors’ are other groups of the world’s largest currencies, such as GBP/EUR.

Each fundraiser has two components. The first is the ‘base money’. When counted in a commercial loan, this component is always equal to 1. The second term is ‘quote currency’.

For example, consider the GBP/EUR exchange rate = 1.19. The base currency is pounds sterling (GBP) and the base currency is euros (EUR). The cost of printing is £ 1 to 1.19 euros if you decide to buy. Alternatively, it costs € 1.19 to buy £ 1.

When you buy two dollars, the price you pay is called the ‘ask’ and when you buy it is called the ‘bid’.

Ways to trade forex

There are three main ways to trade forex on the scale:

  • stock market. This is the largest forex market where currency pairs are exchanged and prices are evaluated in real time, depending on supply and demand.
  • front market. This is where forex traders enter into fixed agreements with each other, securing a specific trading price for an agreed -upon currency in the future.
  • future market. In the case of forex and stock markets, this is where traders take a standard deal on an exchange that is dedicated to buying or selling a pre -agreed currency at a market price. specifically at some point in the future.

Forex jargon

  • Cash flow. In addition to the large and small ones listed above, the ‘exotics’ are about pairs with small currencies traded as the Mexican peso (MXN).
  • Laha noi noi. This is the difference between the purchase price and the purchase price of a currency pair. A high spread is a big difference between the price and the demand price. Spread is measured in ‘pips’.
  • Pips. A pip in forex is usually about moving one digit to the fourth decimal place of a currency pair. So if GBP / EUR moved from € 1.19261 to € 1.19371, then it moved by one pip. The movement of the price in the fifth place in the forex market is known as a ‘pipette’.
  • The main difference in the pip rule is that the Japanese yen is the current currency. In this case, a pip is counted as a single digit move to the second digit after the decimal point. If the USD / JPY changes from 110.05 to 110.02, this is a three-pip move.
  • Leverage. Another term for lending money is that traders can play the forex market for more money than they want, or they can keep it.
  • Piece. The stock needs to use leverage with your stock.

Increase available opportunities

Another jargon word in forex is ‘lot’.

A 50-pip move is not available to an FX trader if he is trading at 100 or 500 coins. That’s why most FX traders buy and sell currencies in ‘bulk’ – currency groups that allow them to make good use of small price movements.

The standard lot is equivalent to a 100,000 -pound stake. Buying a single currency of EUR/USD means selling 100,000 euros of their value in US dollars.

This is where traders use leverage (see above) to avoid keeping their entire currency in a trading position. With leverage, you need to set a fraction (limit) of the total value of your position to open a trade.

Leveraged credit is problematic, however, because losses can increase and the initial amount borrowed will exceed.

The quantity comes in micro (1,000) and mini (10,000) groups.

How do I trade?

You can choose from any of the websites run by forex brokers as well as some trading applications. Make sure your provider is regulated by the UK’s financial watchdog, the Financial Conduct Authority. The money should be kept in a separate account so that, if your customer goes bankrupt, your money will be safe.

Have a clear idea about the types of marketing you want to do and know how much it will cost with the platform or software provider you choose. The more complex the currency pair, the greater the spread to execute a trade.

One of the most popular platforms is forums where you can communicate with other users. If you’re a new trader, look for providers that offer online tutorials or the option to train traders on demo accounts with virtual currency.

While the FX market is a sleepless night (except on weekends), 24-hour support from your web provider is best. Some services allow you to open and close positions when certain levels of trading have been reached, ensuring that your account does not result in a negative risk.

In order to have time to pay back, you need to research your chosen funds. For example, you need to know in advance the days when countries will publish their key economic statements about GDP figures, balance of payments, inflation and so on.

Fair markets, interest rates and important news events play a role in determining the strength or weakness of a currency.

Leave a Comment