How to trade forex for beginners may face confusion on how to start.
But if you already have stock trading experience, trading forex will be easier, because the way it works is almost the same.
How to trade and make money in forex trading in South Africa, Urdu, Nigeria, all ways is the same.
How to read the price movement chart, how to trade forex with news, how to trade forex with $ 10, etc.
Many learning resources can be a reference for learning how to trade.
But the article Tenkofx.co.za will try to provide further explanation in the hope of providing knowledge and spirit to get to know trading more, thankfully finding out how to trade forex for a living.
How to trade forex trading is very simple, you buy and sell currencies with two ways of opportunity.
If the buy and then the price goes up, you will profit, and if you sell and then the price goes down you will profit, very simple.
But forex trading is also risky so in many learning how to trade.
There is always a warning about risk disclosure, maybe you could lose money or part of the trade that you do.
It is very important that you recognize the risks so that they do not fall into the brink of bankruptcy.
TenkoFX is a regulated broker that provides access to financial markets for forex traders or trader investors starting forex and CFD trading and crypto trading.
Gives retail traders the opportunity to start trading with a minimum capital of 10 $ with leverage up to 1: 500
How to make money in forex trading
How to trade In forex, as traders will buy and sell currencies when we do buy any currency.
We expect that prices will rise, with prices that rise then we will resell the currency we will get profit.
Conversely, if we sell currencies, we expect prices to fall, and then we will sell currencies by making a profit.
For example, if we buy the EUR / USD pair, we are buying Euros by selling US Dollars at the same time.
In this case, we expect the Euro to strengthen higher in the future than now.
And if that expectation becomes true then the EUR / USD price chart will move up, and we can get profit from forex trading.
Conversely, if we sell EUR / USD, it means that we sell Euros by buying US Dollars at the same time.
We do this when we expect the US Dollar to strengthen even more than the Euro in the future.
If that happens, then the EUR / USD price chart will move down, and we can still get money from forex trading even if the Euro exchange rate decreases.
How to read a forex quote
How to trade in forex?
How to write Forex trading instruments are always paired, such as EUR / USD, GBP / USD or USD / JPY.
Therefore, in each foreign exchange transaction.
We simultaneously buy one currency and sell another one
In one pair, the first currency listed to the left of the slash (“/”) is the base currency.
Whereas the second currency on the right is called the counter currency.
Long/short, bid/ask, spread
How to trade In forex trading, the most common terms are:
- Buy or Long: If you think the value of the base currency will rise.
- Sell or Short: If you think the value of the base currency will go down.
When you buy a currency pair, the exchange will tell you the rate for one unit of the base currency.
For example, the current EURUSD at the rate of 1.1094 this means to buy 1 Euro you spend with 1.1094 USD.
But in the forex chart, when you buy / long EURUSD you get a price that is different from the running price.
The price difference is called a spread which is a profit taken by the broker.
Because forex trading is similar to you buying or selling currencies at a money changer.
There will always be the price difference from the running price.
The bid price is the price at which you as a trader will sell the base currency.
Ask Price is the price at which you as a trader will buy the base currency.
Usually, the ask price is higher than the bid price, because the ask price is the price at which a broker will sell the currency to you.
And the bid price is the price at which the broker will be willing to buy from you that currency.
How much the difference between the bid and ask of the running price depends on the spread value set by the broker as a service provider to buy and sell currencies.
If you have opened a position in a currency pair.
To realize the profit of forex trading you have to close the order.
On Buy trades, to close order means sell.
If you originally Sell, to close means is Buy.
Let start with an example
How to trade example.
GBP/USD shows a bid price of 1.2800 and an asking price of 1.2804.
If at that time you estimate the value of GBP will strengthen/rise, then you take BUY GBP / USD at 1.2804.
After some time, the price will change. Can move up, can also move down.
If your prediction is correct, the value of GBP / USD will move up.
For example up to the number price 1.2804 Now the time that’s your chance to be able to take profit forex trading by doing CLOSE (Sell) GBP/USD at 1.2820.
From 1 forex trading transaction earlier, the benefits obtained are: 1.2820 – 1.2804 = 16 Pip ( you can learn about pips here)
That is if your prediction is correct, what if it turns out that the price of GBP / USD is moving downwards, or does not match your prediction?
For example, GBP/USD actually turns down to the number 1.2770, if you do CLOSE (Sell) in this position, it means: 1.2770 – 1.2804 = -34 Pip (you lose 34 Pip).
The profit you get as pips, to convert to currency values requires certain calculations, you can learn it here.
But actually you don’t need to bother counting manually.
Because the trading platform has done an automatic calculation of how much money you get by knowing the type of account and the size of your account contract.
When to buy or sell currency?
Read also What is CFD Trading? In Online Trading
How to trade forex will need to understand.
When to buy or sell on Forex? In this case, traders will consider in fundamental analysis, a country’s currency will describe the overall economic condition of the country.
In this case when to buy or sell currency traders will pay attention to how the country’s economic conditions, in terms of productivity, manufacturing, or also central bank interest rates, unemployment and so on.
All data will be considered by a trader whether he will buy the country’s currency or sell the currency.
When to buy or sell EUR/USD?
How to trade in pair EURUSD
In the EURUSD pair, the base currency is the Euro, and the counter currency is the USD.
When you predict the condition of countries in the European region is growing well, production is increasing, exports are increasing, unemployment is decreasing.
Then traders will buy euros, hoping that this currency will strengthen in the future.
But on the contrary when you see economic conditions in the Europe region are not in good condition, high inflation, slow economic growth, a lot of unemployment.
Then traders will sell euros in the hope that prices will down.
However, traders will also pay attention to the economic conditions of the United States, so that it might be possible when the economic conditions of the euro area grow in well.
But the currency actually weakens against the USD, this is because the condition of American fundamentals is considered better so there will be a battle between buyers and sellers of the Euro and USD.
When to buy or sell USD/JPY?
How to trade in pair USDJPY.
In USDJPY pairs, the currency that is the base currency is USD, if you Buy on this pair it means that you buy USD using Japanese Yen as a counter currency.
If you predict the Japanese economic condition is in good, while the US economic condition is not good, the trader will sell.
But conversely, if the Japanese economic condition is bad and the American economic condition improves, the trader will Buy on this USDJPY pair.
When to buy or sell GBBPUSD?
In the GBPUSD pair which is the base currency is GBP, if you Buy on this pair, it means you are buying GBP using USD.
If you predict that British economic conditions are better than the United States economic conditions, traders will buy.
And vice versa if you predict British economic conditions slowing down, while United States economic conditions improve, then traders will sell on this GBPUSD pair.
When to buy or sell USDCHF
How to trade in pair USDCHF
In USDCHF pairs, the base currency is USD, if you buy USDCHF pairs, it means you buy USD using CHF.
If you predict that Switzerland’s economic conditions are better than those of the United States, traders will sell, hoping that the USD will weaken.
Conversely, if you predict that Switzerland’s economic conditions are worse than those of the United States, traders will buy, hoping that the USD will strengthen against CHF
How margin trading works
In forex, for buy or sell transactions using lots, 1,000 units for micro, 10,000 units of mini accounts, or 100,000 units of standard accounts depending on your broker and the type of account you have.
Maybe you are worried because you don’t have as much as 1000 euros or more to buy EURUSD.
With margin trading and leverage gives you the opportunity with low capital.
Leverage is a proportional loan scheme with margin trading so that it can increase power to buying currency.
Let say, a broker offers 1: 100 leverage, it’s mean traders with a capital of 10 USD can have a purchasing power of 1000 USD (from 10×100).
In this case, 10 USD becomes a margin trading that the trader needs to submit to the broker.
Rollover interest rate swap
Usually, for overnight trader positions, or usually if you have an open order past 5:00 pm EST, a rollover interest rate will be charged, so you have to pay this overnight fee or what is commonly called a swap.
If you want to avoid this rollover fee you can close the order before 5:00 pm EST.
However, this rollover interest rate can be negative or positive, depending on whether you buy or sell a currency pair and also the value of the interest rate of each central bank.
If the value of the interest rate of the currency that becomes the base currency is higher than the value of the interest rate of the counter currency.
If you open buy past 5:00 pm EST, you will receive a positive swap that will be credited to your account.
But maybe the broker will calculate this swap value by considering leverage or also interbank lending rates, for this, you need to refer to your broker.
Even now there are several brokers who have offered free swap accounts, especially this to Muslim traders.
So even if you open order through the night you don’t charge a rollover interest rate, please check your broker, whether offered free swap or no.
Full form of pip in forex
Read also What is pips in forex?
Maybe you’ve heard the term pip in forex, or lots, and pipettes, all of it is a list of terms that all traders need to learn so that they can calculate profit or loss.
To measure changes in the price of a currency pair, using the word pip, this refers to the decimal changes in the currency pair.
For example the price of EURUSD changes from 1.0091 to 1.0092, in this case, the euro has changed by 1 pip that is 0.0001 from the calculation of 1.0092-1.0091.
So pip is the last value in the decimal number, usually, the pair uses 4 decimal places.
Except for the USDJPY pair which is only 2 decimal places behind the comma, for example, the current USDJPY exchange rate is 108.18 so this pair is to calculate per pip with 0.01.
Some brokers offer 4 digits and 2 decimal digits, but apart from that they also offer 5 digits and 3 decimal digits.
For example in a 4 digit broker then the EURUSD pair will be seen to be 1.0980, so if the 5 digit broker will become 1.09800.
There will be five decimal after the comma, to 0.00001, this value is called a pipette, which is the value of a fractional pip.
If the EURUSD pair moves from the price of 1.09800 to 1.09001 then this means the pair moves 1 pipette.
Thus if one pipette value is equal to one-tenth of a pip or 0.1 pip, this number is on the last digit and on the mt4 platform with smaller numbers written.
How to calculate a value per pip forex
Each currency has a value relative to other currencies, people call it an exchange rate, where the value always changes depending on market demand.
Need to understand how to calculate a value per pips, on a currency pair.
We will try to take an example in 4 decimal pairs, were to simplify calculations, we say for example EUR / USD at 1.1008 is equal to 1Eur / 1.1008 USD.
Take, for example, the pair EUR / USD at 1.1000, for simplicity to be 1 Euro to 1.1000 USD.
The formula is Change in value in counter currency times the ratio of the exchange rate = pip value.
Take, for example, the pair EUR / USD at 1.1000, for simplicity to be 1 Euro to 1.1000 USD.
Then using this formula will be [.0001 USD] x [1EUR / 1.1000 USD] = 0.0000909 Euro.
If trading with 10,000 units multiplied by the value per pips is 10,000 units X 0.0000909 Euros.
Another example in the GBPJPY pair is a crosses pair, where the value changes with two decimal places to be 0.01 JPY.
To calculate the GBPJPY value per pips at 129.44
The calculation will be like this, for GBPJPY easier at 129.44 meaning 1GBP / 129.44 JPY.
0.01 JPY x 1 GBP / 129.44 JPY is equal to 0.0000772 JPY
Is it very important to understand how to calculate values per pips? actually not, because your broker will automatically calculate using their platform.
If your broker provides a forex calculator, this will help you to do the calculations so that it is much easier than you calculate manually.
Lot size and leverage
Read more What is Leverage Forex?
What is Lot? “It is a unit of measure of the value of our transaction / Contract size. Lot is also commonly mentioned as Quantity by some traders.
Spot Forex is using lots of trading. The standard lot size is $ 100,000. There is also a mini lot size which is $ 10,000. micro is equal to $ 1000 and nano is equal to $ 100.
Currency is measured in pips, which is the smallest increment of that currency.
To take advantage of these small increases, you need to trade a certain currency in large quantities to see significant gains or losses.
For example, we will use the $ 100,000 lot size. Now we will count a few examples to see how the lot affects the pip value.
Pair USD / JPY with an exchange rate of 119.90 hence here to calculate
- $ 100,000 x (.01 / 119.80) = $ 8.34 per pip
USD / CHF with an exchange rate of 1.4555
- $ 100,000 x (.0001 / 1.4555) = $ 6.87 per pip
In cases where the US Dollar is not the base currency, the formula is somewhat different.
EUR / USD with an exchange rate of 1.1930
- EUR 100,000 x (.0001 / 1.1930) = EUR 8.38 x 1.1930 = $ 9.99734
rounded up will be $ 10 per pip.
GBP / USD with an exchange rate of 1.8040
- GBP 100,000 x (.0001 / 1.8040) = 5.54 x 1.8040 = $ 9.99416
rounded up will be $ 10 per pip.
Your broker may have a different way to calculate the pip value relative to the lot size but regardless of how they do it.
They will be able to tell you what pip value is used for the currency you are trading at a certain time.
Once the market moves, the value of the pip will also move depending on what currency you are currently trading with.
Then what about leverage, this topic you can read here
Read also Currency Symbol Country In the World
Before learning more forex, it is worth doing a flashback of glossary of terms in forex which is a strange language, which may be for beginners to never know before.
Actually, this term is partly explained in several previous articles, but here to remind Forex Lingo.
Major minor currencies
Major currencies are the five most traded currencies in the forex market, namely USD, EUR, JPY, GBP, CHF, CAD, NZD, and AUD.
Whereas Minor currency is apart from the five currencies.
Forex base currency
Base Currency in any pair is the first currency in a currency pair.
For example: USD/CHF, USD = base currency.
Quote Currency in any pair is the second currency in the currency pair.
Like as USD/CHF, USD = Base Currency, CHF = Quote Currency.
Pip is the smallest unit price of any pair.
Most currency pairs have five-digit numbers.
The first 1 digit is the base number and the 4 digits fractional number (behind the comma).
For example, EUR / USD is equal to 1.2420 in this case, one pip is equal to the smallest change in the fourth decimal which is 0.0001.
So if in a pair where there is USD, then one pip is always equal to 1/100 cent.
Except for the USD / JPY pair, here 1 pip is worth 0.01 $
One pipette is had to value to one-tenth of a pip.
Some brokers offer a price of five digits, which is a fractional pip.
For example, EUR / USD moves from 1.32156 to 1.32158, then the value is 2 pipettes.
The bid price is the offer price, is the price at which the market is ready to buy a certain currency pair.
Or in other words for traders is the price at which they can sell.
For example, currently the GBP / USD price is 1.8800 / 1.8803, then 1.8800 = bid price and 1.8803 = ask price.
If you currently intend to sell GBP, the value is 1.8800.
Ask price = the asking price, the opposite of the bid price, then this means the price at which the market is ready to sell a certain currency or the price at which we can buy.
As the example above GBP / USD 1.8800 / 1.8803, then 1.8803 = ask price, if you intend to buy GBP then the price is 1.8803.
Spread meaning the difference from the bid and ask price. Bid prices are always and generally smaller than the asking price. Following the example above GBP / USD 1.8800 / 1.8803, this means the spread is 3 pips.
FX quote convention
A quote can be regarded as a common writing format in forex (standard) to inform the price movement of a particular pair.
The format is as follows
Base currency/Second currency Bid price / Ask price
for example: GBP / USD 1.7750 / 1.7753, USD / JPY 84.90 / 84.94.
Cross currency definition
Cross currency is a pair/currency pair in which there is no US currency in it.
For example EUR/GBP, GBP/JPY. For example you buy EUR / GBP = buy EUR / USD and sell GBP / USD. In general, Cross pairs often carry higher transaction costs.
For example, say you open a mini account with a leverage of 200: 1 or 0.5%.
Where one mini lot is equal to $ 10,000. If trader open a transaction for 1 lot, then the margin is $ 50 from calculation ($ 10,000 x 0.5% = $ 50).
Leverage meaning, with small capital but can control the equivalent of large capital.
With the usual ratio is given by the broker varies from 1:100 to 1:400 even 1: 1000
Generally, traders will start to feel anxious and afraid when the broker informs you that the remaining balance has shrunk to fall below the minimum level of requirements, as a result of an open position has moved against you.
If the opposing position (loss) reaches the specified threshold, the broker will close the order (can be part / all).
This margin call can be avoided by intensively monitoring your account balance. Or by using a command/stop-loss facility on each order to limit the risk of loss.