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 happens in the marketplace. Our focus in this forex trading tutorial is the the forex market, also called Foreign Exchange, or FX.
The Forex market is the market where buying and selling of currencies happen .
The Forex market is the largest financial market. Its average daily trading volume is more than $4 trillion. Putting all the world’s stock markets together, their trading volume would only equal around 20 percent of the Forex market.
That makes the currency market the most liquid market worldwide.
What liquid means in simple words, is how fast you can sell a product. It is that if you have more buyers and sellers in a market, you are likely to sell your product much faster.
Buying and selling stocks happens in the stock exchange. If you are looking to trade stocks, your trades will be processed through one of these stock exchanges. So, it is a physical entity that facilitates the trading of shares to investors.
Accordingly, the stock market is a centralized market, where the exchange is the center.
Unlike the stock market, the Forex exchange is a decentralized market. It is called the over-the-counter market (OTC).
That simply means that there is no physical exchange like the New York stock exchange or Nasdaq that complete the trades between traders. Instead, trading is done through a computer network with no centralized physical location.
The Forex market is a network of multiple banks and financial firms that exchange currencies directly or indirectly.
At highest levels, major banks trade directly with each other. These major banks are called the interbank market.
At the next levels, small sized banks trade indirectly with major banks through an electronic brokerage service.
Next are the brokerage firms, hedge funds, and regular corporations. And finally, the retail Forex traders(Individuals).
Generally, each level provides the next lower level with liquidity.
For example, if a retail trader placed an order to buy euros at a broker, the broker passes this order to a bank at the higher level which has sizable amount of euros. The bank executes this transaction by selling the broker the euros, the broker then reflects that in my trading account. This happens instantly through a trading software.
Usually higher level firms like banks, provide lower level firms or clients liquidity, and therefore they are called liquidity providers.
Largest Banks such as Citibank, JP Morgan, HSBC to name a few, are the main liquidity providers in the market.