What is the Forex?

forex

Before we get into how to actually trade the Forex markets, we need to understand a bit about what the Forex market is.

The Forex market (or foreign exchange market) is the largest financial market in the world, with an average daily turnover of over 4 trillion Dollars.

The Forex markets are open 24 hours a day from Monday to Friday.

Who trades the Forex markets?

Well the main players are:

  • Banks
  • Central Banks/governments
  • Hedge funds and investment managers
  • Companies/corporations
  • Individual traders (retail traders)

So we fit into the retail trader sector, and although the volume of trades we total is much lower compared to say the banks and financial institutions, the retail trader sector is increasing rapidly.

How do we make money in the Forex?

In a nutshell, we aim to make money by trading one currencies against another, an example, of a Forex pair would be the GBP/USD – This pair contains the Great British pound currency and the United States dollar currency.

We are very lucky in the Forex markets because unlike stocks and shares, we can make money from ‘selling the market’ (SHORTING) or by ‘buying the market’ (GOING LONG).

Here are two examples of what I mean:

1) If we buy the GBP/USD, we say we are going LONG on the GBP/USD. This means we are buying the GBP and selling the USD. So we are looking for the GBP to strengthen and the USD to weaken.

2) If we sell the GBP/USD, we say we are going SHORT on the GBP/USD. This means we are selling the GBP and buying the USD. So we are looking for the GBP to weaken and the USD to strengthen.

So, it’s just a simple battle between the two currency pairs.

We do need to take the spread into account when we enter trades and this is discussed in further detail in the advanced material section.

Key factors that make the Forex so attractive

  • The ability to trade the Forex 24/7 – you can choose when to trade and when not to
  • The ability to start off with a small account and build it up into something much larger
  • The ability to trade the market up and down, so you can profit in both directions
  • The advancements in technology mean you can trade anywhere you like, as long as we have an internet connection
  • The ability to practise trading on demo accounts, i.e., to learn how to trade without any risk
  • Anyone can trade – young, old, male or female – it doesn’t matter. What is important, is that you are prepared to learn and have the determination to master this business
  • You can keep your day job and still trade to make a second income – it need only take 10 minutes out of your day
  • It can become a full time profession
  • Once you learn to trade consistently, the sky’s the limit – there’s no boss to hold you back or to answer to.

One point I must make clear is that we must not be under any illusion that this is a get rich quick, money making scheme. Trading is an art, which needs to be mastered over time with experience. Anyone who says they can teach you how to trade in a week or two is talking utter rubbish.

Module 1: The Basics

Module 2: Market Analysis

Module 3: Price Action Setups

Module 4: Chart Setup

Module 5: Trade Management

Module 6:  Trade Psychology

Module 7: Continue your learning