Forex Trading for Beginners

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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 video with trading - and so

what I thought we'd do is take maybe

something of a step back 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 foreign exchange

market it's the biggest market in the


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 is much lower

when compared to other markets with

currency markets no currency moves in

isolation so we have the idea of of

currency pairs 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


let's 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 koruna

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 zloty if you wanted

to you could take a view on the Polish

zloty against the Japanese yen polish

zloty against the Mexican pesos there

are all sorts of combinations you can do

it 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 - and

- 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 that 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

the 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 and almost thirty two cents so when

we're looking at Forex pairs foreign

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 or what am

i buying am I saying that dollars gonna

go up my saying the yen's gonna go up

it's understandable why this is

confusing to some but it's really easy I

think to understand so again let's take

a quick look on a platform to understand

when we're trading what direction are we

actually trading in when it comes to the

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

pounds 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 why the markets gonna fall

how do I profit from this well how do I

try and profit from this the way to do

it I would click on sell I would sell

pound against the US dollar so I'm

speculating the value of the pound is

gonna drop on this

it's going to turn lower okay so that's

that 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 the dollar yen is

gonna fall so the dollars gonna fall and

the yen is correspondingly gonna rise

when it comes to trading hours foreign

exchange market is a true 24-hour market

so it starts off Sunday night UK time

when the Asian markets open for business

and it trades all the way around the

clock till Friday evening when New York

finishes off for the weekend then on

Sunday the whole thing starts again but

you don't need to be intimidated or

worried by there's 24-hour market let's

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

pairen 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 7:00 to 8:00

in the morning UK time when the focus

shifts 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 US

and we had something of a quiet finish

but but don't be I think worried about

this being a 24-hour market you know

thanks to stop losses and take profit

orders you can set up your trade so if a

certain level gets hit you come out for

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 that like so many other

products these days you're trading using

leverage so even though you might have

let's say $100,000 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 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 videos about how you might

want to use stop losses the last thing

we might want to look at is what moves

foreign exchange pairs 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 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

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 from 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 an

effect of foreign exchange markets so

that's it that's it that's a brief

introduction to some of the basic

mechanics of foreign exchange now every

week we do different videos on trading

strategies but if you have any questions

about this one leave us a message in the

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next video goes up but we'll bring

things to an end I hope you found it

useful and I hope you have a good

trading week