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Forex Trading Tutorial

January 15, 2017
by David Brown
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The forex market is the currency exchange market with the highest liquidity.  It has more than $5 trillion transactions happening every single day. Unlike the stock market, there is no central exchange and this allows forex traders to trade 24 x 7. There is huge potential to earn a six-figure income by becoming a full-time forex trader. In the forex market, you can make profit from the fluctuation of the currency values irrespective of the direction of the movement.

Introduction to forex market

The largest financial market, the forex market is an over-the-counter market where there is no central exchange and clearing house. The market participants can engage in Forex trading depending on their level of access. The electronic brokerage system (EBS) is open only to large banks and financial institutions. Retail traders can only access the forex market through the online market makers, who are essentially forex brokers. These brokers will have a relationship with the financial institutions on the EBS market. The forex market remains open for 24 hours a day, 7 days of the week. Anyone from any country can participate in retail currency trading using the services of a forex broker.

Forex trading tutorial – Currencies in the forex market

To begin your journey as a forex trader, you must first sign up for a trading account with a forex broker. Reputable forex brokers allow you to create a free account and provide you with a demo account with which you can practice trading. When you are ready to become a professional retail forex trader, you can add money to your forex account and start trading in real time. Many forex brokers allow you to start a real trading account with just $100. This is one of the biggest advantages of the forex market because with a 100:1 leverage, you can trade $10,000 with just $100 in your account.

In the forex market, you can buy one currency and sell another simultaneously. The price of the currency is always expressed in terms of another currency. This is called a currency pair. The purchase price between the two currencies in the currency pair is the exchange rate.

For example, when you trade EUR/USD, you buy or sell EUR in terms of USD. In other words, the EUR/USD rate tells you the number of USD you can buy for one EUR. Generally, you will buy EUR/USD when Euro increases against the dollar and sell EUR/USD when Euro decreases in value. Even a small movement in the exchange rate can result in notable profit or loss depending on the leverage offered by your forex broker.

At all times, you must remember that the forex market is highly risky. The leverage can be used to grow your account quickly and at the same time, it can wipe out your entire investment. The market is extremely volatile and even if you delay the trade by a mere second, your profit will turn into a major loss. You should never start trading unless you learn all the basics about the art of trading currencies.