Welcome to Forex Trading Tutorial For Beginners basics guide. If you are new to Forex trading and willing to start learning, you have landed at the right page.
This is a step by step Forex trading tutorial. This tutorial aims to provide all the necessary information to newcomers in one place.
This tutorial is created by a Forex trading expert; AKA Technician. Technician has been in the markets for over a decade . He is specialized in technical analysis and running for the Chartered Market Technician(level 2) certification. In addition to a Master’s degree in finance .
In this guide, we will explain the most basic definitions and concepts. The concepts you must know before you start learning how to analyze the markets, and make trades.
We will explain things like, what Forex trading is, and how trading works. Also, what is a Forex broker and how to choose one. How to read the prices and much more .
After completing this tutorial, you will be ready to start the intermediate level tutorial. The intermediate tutorial covers analysis and forecasting: Technical Analysis Basics Tutorial.
We ask you to be patient while reading, especially in the beginning. If you feel that a topic is not cleast keep going, it will be clearer by the end of the tutorial.
If you have any questions after completing, please drop it in the comments section. It is at the end of this page.
You can move between chapters through the drop down menu below.
Trading is the action of buying and selling a product, aiming to generate profit,over a short period of time. And that what makes trading different than investing. Investors usually hold their positions(trades) for a longer period, more than a year.
The products that you buy and sell can be several; a currency, a company’s share, a commodity or any other “Security” (also called Instrument). A security is any tradable asset. Such as Microsoft shares, or the Euro currency, or commodities like oil or gold.
In this Forex Trading tutorial for beginners, our main focus is the Forex market. The Forex market is where currencies trading happen.
Trading Forex allows you and me (individual retail traders) to speculate(bet) in the currencies market, also called the Forex market.
To be able to do so, we need to open a trading account with a forex broker, then we can start buying or selling currencies, aiming to generate profits.
In Forex, we simultaneously buy and sell currencies. Simply, just like if you want to travel from the U.S. to Japan, you will go to the bank to exchange your dollars to the Japanese Yen.
Simply, Forex Trading is exchanging a currency with another currency aiming to generate a profit.
In the USD and Japanese Yen example we just mentioned, since you exchanged your bucks to japanese yen, you would generate profit if the Japanese Yen rose in value against the U.S. dollar.
Let’s say you exchanged $2,000 to JPY at an exchange rate of 100 Yen for every dollar.
$2,000 x 100= 200,000 Yen
After a couple of months, the exchange rate changed to 90 Yen for every U.S dollar.
This is a 10 percent decrease in the value of U.S. dollar against the Japanese Yen.
Now, if you exchange back the JPY you have to U.S dollars.
200,000 / 90 = $2,222
A good $222 profit from this trade.
Since trading has a short time horizon. Traders buy and sell frequently.
In fact, there is a type of traders called “scalpers” that make dozens of trades each day.
Scalpers enter the market for seconds or few minutes then exit. They buy a product then sell it for a tiny profit. And keep repeating the process(This trading style is not recommended).
Trading types or styles vary, the main styles are:
- Day trading: traders enter and exit their trades before the end of trading day. This type of trading is more applicable in the stock market, as the market closes every day. The forex market only closes on weekends (we will discuss this later in the tutorial).
- Short-term swing trading: traders can hold a position for one day up to few weeks.
- Position trading: traders trade for a long time horizon. They hold their position for months.
Next, let’s have a quick introduction to the forex market structure.