Forex for Beginners: How to Get Started in Forex Trading

Have you heard about forex trading but don’t really know what it is? Want to learn more about forex and start trading this market? Then this complete forex for beginners guide is for you!
Keep reading to get all the information you need to start learning forex for beginners:

• what forex is, explained for beginners
• how to learn forex trading for free
• which forex trading strategy beginners should use
• how to choose the right forex trading platform
• the best tips for becoming a profitable FX trader

Forex for Beginners: Become a Successful Forex Trader in 7 Steps

1. Study how forex trading works and take “forex for beginners” trading courses
2. Adopt a trading style that suits your personality and goals
3. Work on your forex trading plan and backtest it on an FX trading platform
4. Choose the right AMF-authorized forex broker for your needs
5. Use a demo account to learn the platform and test your forex trading strategy
6. Fund your FX trading account
7. Start trading online

To go further, also read our guides “Forex Course” and “Forex Strategy“.

What Are the Best Forex Brokers Available in France?

Why Trade the Forex Market?

Whether for beginners or professionals, the currency market attracts all kinds of investors. Why take an interest in the foreign exchange market? Why invest in forex? Is it worth it? What are the risks of forex trading for beginners?

Advantages of Forex Trading

• The largest market in the world

• High liquidity

• Huge trading volume, with an average of $6.6 trillion in global currencies traded daily according to the Bank for International Settlements (BIS)

• Market open 24 hours a day from Sunday evening to Friday evening

• Ability to trade currencies before or after your normal working day

• No one really controls this market, given its size and number of participants

• Leverage available to increase your market exposure

• Low trading capital required

• Reasonable transaction costs

• No commission on most forex trading accounts

• Attractive return potential

• Profit from price moves in both bear and bull markets

• Some currencies are quite volatile, allowing you to profit from large price moves

• Use different forex trading options and several types of currency pairs: majors, minors, exotics

• Various forex tools, platforms and technologies for beginners to trade the currency market better

• Hedge positions already open in a portfolio to protect against currency risk

• Several position sizes available for FX trading: standard lot, mini lot, micro lot, nano lot

• Many free forex courses and other educational content to learn forex for beginners online

• A market that suits different trading styles and strategies: scalping, day trading, currency carry trading, news trading

• Demo accounts always available with regulated forex brokers

Disadvantages of Forex Trading

• OTC (over-the-counter) market

• High overall volatility, with periods of low volatility at certain times of day and on certain forex pairs

• A self-directed learning curve that can be long

• Counterparty risk and operational risk

• Dangers of using too much leverage

• Many online forex scams outside AMF-regulated trading

• Lack of transparency

• Sometimes complex pricing of currency pairs

• Small investors can be at a disadvantage against large institutional investors such as commercial banks, central banks, hedge funds and multinational companies

• Less protection of client funds than in some regulated financial markets

The 11 Best Tips to Get Started in Forex Trading

1. Take your time
2. Review your financial situation
3. Understand what forex is
4. Learn how forex trading works for beginners
5. Define your trading profile
6. Create a trading plan
7. Choose the right forex broker for your needs
8. Test the forex trading platform and your strategy on a forex simulator: use a demo account before trading live
9. Keep a trading journal to improve your system and profitability
10. Control your emotions
11. Always follow your trading plan

Forex Trading for Beginners Explained

Let’s start this complete forex for beginners guide with some simple explanations of the market, so you know everything about forex.

What Is the Forex Market?

The first thing we’ll cover in this forex for beginners guide is what the forex market is and how it works. So, what is forex?

Even if you don’t know exactly what the forex market is, you’ve almost certainly taken part in it when traveling and exchanging your local currency for foreign money.

The forex market (Foreign Exchange, or FX) is simply the market where currencies such as the EUR (euro), the USD (US dollar) and others are traded. For more information on world currencies, take a look at those listed in the next section.

List of Some World Currencies

Currency and Currency Pair Nicknames to Know

• US Dollar (USD): Buck or Greenback

• Euro (EUR): Single currency

• Pound Sterling (GBP): Sterling

• GBP/USD: Cable

• USD/CAD: Loonie

• EUR/GBP: Chunnel

• GBP/USD: Gopher

• AUD/USD: Aussie

• NZD/USD: Kiwi

How Does the Forex Market Work?

When you invest in the forex market, you don’t invest in individual currencies but in currency pairs such as EUR/USD (euro vs US dollar). See the next section for more details on currency pairs.
In the EUR/USD pair, the EUR is the base currency and the USD is the counter currency.

The base currency is always on the left of a currency pair, while the one on the right is always the counter currency (sometimes called the quote currency). A forex quote shows the value of the counter currency for one unit of the base currency.

• If EUR/USD is quoted at $1.21, it means €1 (euro, EUR) = $1.21 (US dollar, USD).
• If GBP/NZD is quoted at $1.89, it means £1 (pound sterling, GBP) = $1.89 (New Zealand dollar, NZD).
• If CHF/AUD is quoted at $1.52, it means CHF 1 (Swiss franc) = $1.52 (Australian dollar, AUD).

Available Currency Pairs

Among the currency pairs available for forex trading, you’ll find the following:

• major pairs – pairs with currencies from the world’s largest economies, generating the most trading volume

• minor pairs – pairs with currencies of major countries but excluding the US dollar (USD)

• exotic pairs – pairs combining a major currency with the currency of a smaller developed economy or an emerging economy

• pairs with commodity currencies – pairs with the currency of a country whose economy depends heavily on a commodity such as oil, agricultural products or metals, like the Australian dollar (AUD) and metals, the New Zealand dollar and agricultural products, or the Canadian dollar (CAD) and oil.

How Do You Trade the Currency Market?

Trading forex simply means placing FX orders on certain currency pairs based on your scenario in order to make a profit. Note that the currency market is not a regulated exchange: all trades take place over the counter, on what is known as the OTC market.

When you trade forex, you don’t receive the currencies you buy (and you don’t have to hand over the ones you sell). You simply profit from price changes — see how to get rich or make money in the markets.

Investors often use leveraged forex derivatives such as CFDs (contracts for difference) to bet on rising and falling markets without owning the underlying asset. Forex CFDs let you profit from the difference between the buy and sell prices of your positions in the currency market.

The other thing to understand in forex for beginners is that every FX investor automatically does two things when trading currencies: they buy one currency and simultaneously sell another.

The smallest price move in a currency is called a pip — the fourth decimal place for all currency pairs except those involving the Japanese yen, where the pip is the third decimal place.

Let’s go back to trading basics to work out a loss or profit in the FX market:

1. When you think EUR/USD will rise, you buy EUR/USD (long position). By opening this position, you’re actually buying EUR and selling USD at the same time:
   1. If prices RISE, you make a PROFIT
   2. If prices FALL, you make a LOSS
2. When you think EUR/USD will lose ground, you short sell EUR/USD (short position). By opening this position, you’re actually selling EUR and buying USD at the same time:
   1. If prices RISE, you make a LOSS
   2. If prices FALL, you make a PROFIT

To calculate your gain or loss, you need to know how many contracts you’ve opened — that is, the number of lots. There’s no need to calculate the forex lot size, as you decide your position size based on your trading strategy.
In general, a standard forex contract is one forex lot, a position of 100,000 units of the base currency. Since not all traders can afford such positions, top forex brokers usually offer smaller lots, such as mini lots of 10,000 units.

The Best Times to Trade Forex

Forex for beginners: how do you know when to trade? While the currency market is open 24 hours a day, 5 days a week, not all trading periods are equal. As a beginner forex trader, it’s important to know when to trade and when to stay away.

Overlapping Trading Sessions

The best times to trade currencies are first and foremost when several trading sessions overlap: Tokyo–London and London–New York. During these periods, focus mainly on major currency pairs, as shown in Investopedia’s forex chart for beginners below. You can see the rise in volume and currency price changes at 7 a.m. GMT.

However, you can trade according to your availability and goals. Either way, it’s important to trade according to the session you’re trading in. For example, if you trade during the US session, the best pairs to trade will be those involving USD and CAD. During the Tokyo session, you can focus on AUD, NZD and JPY instead.

Major Economic Announcements

There’s another time when markets offer attractive trading opportunities: major economic announcements. Although risky for beginner forex traders, these moments bring a level of volatility that can produce attractive price moves depending on the trading strategy used.

To take advantage of these moments, you need to know when an economic announcement or statistic will be released. A forex economic calendar can help.

What is a forex calendar of key events? It’s a table listing the most important statistics and events for the currency market, such as:

• inflation figures: CPI, PPI

• employment data: unemployment rate, US NFP report, jobless claims

• economic growth details: GDP, PMI / ISM index

• consumer and business confidence: consumer sentiment, business confidence

• central bank meetings: release of Fed minutes, press conferences

• interest rate decisions: press conferences

• wars, strikes and political scandals

• natural disasters

Who Are the Main Players in the Forex Market?

The forex market is one of the largest markets in the world. It’s also one of the most liquid, with some of the highest daily trading volumes. With more than $6.6 trillion traded every day on average according to the Bank for International Settlements (BIS), it’s easy to see why there are so many participants in the currency market.
Forex for beginners: who are the main forex players to know?

• retail traders

• professional and institutional traders such as investment funds and hedge funds

• brokers

• governments

• multinational companies

• commercial banks

• central banks

Understanding forex for beginners means knowing who the most important players in the market are. There’s no doubt here: central banks are among the most influential players in the forex market.

Why? Because they are the institutions that decide monetary policy. They set interest rates, which affect the cost and availability of money in an economy. These factors influence currency values, and investors can use them to invest smartly.

Central Banks to Know

• BIS: Bank for International Settlements (the central bank of central banks)

• ECB: European Central Bank

• BoC: Bank of Canada

• BoE: Bank of England

• BoJ: Bank of Japan

• SNB: Swiss National Bank

• PBC / PBOC: People’s Bank of China

• Fed: Federal Reserve – US central bank

• RBA: Reserve Bank of Australia

• RBNZ: Reserve Bank of New Zealand

How Much Money Do You Need to Start Trading Forex?

€100, €500, €1,000 or €10,000: how much should you start trading forex with?
The capital you start trading forex with mainly depends on your personal financial situation, why you want to trade online, your attitude to risk, your trading style, the minimum deposit required by your forex broker and the payment method you use to fund your account.

Take these factors into account to define your motivations and goals based on your situation, personality and availability. That will make it easier to decide how much to invest in the forex market.

Broker	Free Demo	Leverage	Demo Duration	Live Account Minimum Deposit
	Try	1:500	30 days without a deposit, unlimited with a live account	€200 / $200
	*68% of retail CFD accounts lose money	1:30	no expiry if active within 3 months	$200

How to Choose the Right Forex Broker

Forex for beginners: choosing a broker. To choose the right forex broker, you first need to understand what it’s for. Then you need to define your trading needs so you know exactly what you’re looking for in a forex broker.
As explained at the start of this article, you need a forex broker to trade the currency market. The broker you select will act as the intermediary between you and the foreign exchange market so you can buy and sell the currency pairs you want.

To choose the right broker, first determine what kind of trader you are, which trading strategy you’ll adopt and what type of market analysis you’ll use. You can then list your trading needs and the platforms and trading tools you need to trade forex well.

Beware of Forex Scams

Beyond choosing an FX broker that meets your needs, one of the most important things is to choose a reputable, reliable and, above all, regulated one. Regulation is essential if you want to trade in a safe environment and benefit from protections from your broker. One of the quickest ways to check that a broker is reputable is to make sure it doesn’t appear on the AMF’s forex blacklist. When you start forex as a beginner, you can also check the Regafi register.

The AMF (Autorité des marchés financiers) is France’s financial markets regulator, whose purpose is to protect investors and help them spot scams. It constantly publishes warnings and blacklists of investment sites that aren’t authorized to operate in France or are scams. In this forex for beginners guide, we want to stress that these lists are very important for beginners.

You can read our dedicated articles, such as the AMF blacklist and the best AMF broker. But you should also check the blacklists or warnings of the other competent national authorities listed in the following table.

10 Factors to Consider Before Choosing a Forex Broker

1. The broker’s licenses and the regulator that supervises it
2. The protections offered
3. Trading fees and other charges
4. The educational content available
5. The trading platforms offered (MetaTrader, ProRealTime, TradingView, cTrader, xStation…)
6. Order execution speed and slippage
7. The ability to adjust your forex leverage
8. The types of trading accounts available (demo account, Islamic account, professional account…)
9. The training on offer
10. The quality of customer service

Here is a selection of credible and reliable forex platforms.

Why Is Vantage the Best Broker for Trading Forex?

• Multi-asset broker regulated by many reputable institutions:
  • Australia, United Kingdom, Vanuatu and the Cayman Islands

• Several protections available for traders:
  • funds held in segregated accounts at National Australia Bank

• Welcome bonus on the first deposit:
  • 50% on the first deposit into a Standard STP account

• Fast trade execution:
  • 90% of positions executed in under 150 milliseconds

• Several trading account types available:
  • Islamic account, Standard STP, RAW ECN, PRO ECN

• Low minimum deposit:
  • $200

• All trading styles allowed:
  • scalping, day trading, swing trading, position trading, hedging

• Popular trading platforms:
  • MetaTrader 4, MetaTrader 5 and social trading platforms such as ZuluTrade

• Relevant trading tools:
  • economic calendar, market sentiment, Pro Trading Tools

• Deposits and withdrawals via multiple payment methods:
  • Visa, Mastercard, Skrill, Neteller, FasaPay, etc.

Open a Trading Account with Vantage in a Few Steps

1. Go to Vantage and click “Live Account”
2. Fill in the Vantage registration form and click “Open Live Account”
3. Enter your personal details on Vantage and click “Next”
4. Share information about your employment and savings with Vantage and click “Next”
5. Set up your Vantage account (MT4 or MT5, account type — Standard STP to get the bonus — and base currency) and click “Next”
6. Confirm your identity and place of residence by uploading supporting documents in the Vantage client area and click “Next”
7. Deposit money into your Vantage trading account to receive your Vantage bonus

The Best Forex Trading Platforms on the Market

One of the factors to consider when choosing a forex broker is the trading platforms it offers. Each platform is different, with its own pros and cons, and they all offer unique trading tools and features worth considering. Your choice should depend on your needs. Discover the best forex apps here.
Whether you’re a beginner or an advanced forex trader, the thought process is the same. Ask yourself the right questions! Which currency pairs do you want to trade? What other markets do you want to invest in? Which technical analysis tools do you need? Do you want to do algorithmic trading?

Here are some of the most popular forex apps and trading platforms on the market.

MetaTrader 4 – The Most Popular Forex Trading Platform

MetaTrader 4 (MT4) was developed by MetaQuotes, a company that provides several of the world’s leading multi-asset platforms to brokers looking to offer their traders a robust, powerful and efficient platform. More than 750 brokers and banks reportedly offer MetaTrader 4!

MetaTrader 4 offers:

• a platform available on Windows, Mac OS and Linux

• an FX trading app for iPhone/iPad and Android to follow the markets on the go

• web-based software (web trading) to trade directly from your browser

• 30 technical indicators

• 23 analytical objects

• 9 timeframes for forex charts

• one-click trading

• many order types, including 2 market orders, 4 pending orders, 2 stop orders and 1 trailing stop

• the ability to develop, test and sell your own trading robots or technical indicators via Expert Advisors (EAs) for algorithmic trading using the MQL4 programming language

• the MetaTrader Market, where you can buy or rent indicators (more than 2,100) and robots (more than 1,700) directly on the platform via PayPal, Visa, Mastercard, UnionPay, WebMoney, Neteller, ePayments and more

• the opportunity to use copy trading and social trading with MetaTrader 4 trading signals (more than 3,200 free signals)

• alerts and financial news to make the most of price moves

• virtual hosting (forex VPS) so the platform keeps running when your computer is off

• the ability to analyze your positions with history and detailed reports

MetaTrader 5 – The Most Powerful Multi-Asset Trading Platform

Also developed by MetaQuotes, MetaTrader 5 (MT5) is the latest version of MetaTrader and aims to improve on MetaTrader 4. It is multi-asset software that lets you trade several markets, including forex, futures, options, bonds and stocks, with more advanced trading tools and techniques.

MetaTrader 5 also offers:

• a platform available on Windows, Mac OS and Linux, translated into 31 languages
• a forex trading app for iPhone/iPad and Android
• web-based software (web trading)
• one-click trading
• the ability to develop, test and sell your own trading robots or technical indicators
• the MetaTrader Market, where you can buy or rent technical indicators and robots built with the MQL5 programming language
• the opportunity to use copy trading and social trading
• alerts and financial news to make the most of price moves
• virtual hosting (forex VPS) so the platform keeps running when your computer is off

But above all, MT5 offers:

• 6 pending order types
• 2 market orders
• 2 stop orders
• 1 trailing stop
• market depth
• 2 order accounting modes
• partial order filling
• professional technical analysis
• 38 technical indicators, including forex pivot points
• 44 graphical objects
• 21 timeframes
• a built-in economic calendar
• the ability to analyze your positions and profitability with more advanced tools and ratios

Which Simple, Effective Forex Strategies Should You Use?

Before starting this essential part of our forex for beginners guide, it’s important to understand that there is no single simple, effective and profitable forex strategy. Moreover, what works for one trader may not work for another.

To make good forecasts in the forex market, you need to decide which market analysis method to use, which trading style to apply and which free forex technical indicators to use, based on your trading plan and goals.

Technical Analysis vs Fundamental Analysis

You need to decide how you’ll make your forex trading decisions. Will you focus on fundamental analysis and trade big price moves based on countries’ economic trends? Or will you rely on technical price analysis to make your trading decisions?
Fundamental Analysis

Fundamental analysis uses a country’s fundamentals to assess its economic health and how its currency may react. Is the currency overvalued by the market (a potential sell signal) or undervalued (a potential buy signal)?

In this case, the key economic indicators we discussed above are essential to get an idea of where a country’s economy is heading and what central banks might decide.

Technical Analysis

Technical analysis focuses solely on the price action of currency pairs. It rests on 3 assumptions: prices always move in trends, history repeats itself, and prices reflect all available information at any given time t.

So you simply analyze a currency pair’s past and current movements to try to determine its future direction and the key price levels to watch.

Scalping vs Day Trading vs Currency Carry Trade

Depending on your financial goals, availability, capital and trading strategy, there are several types of trading you can use. Among the most popular are scalping and day trading for active traders, and currency carry trading for less active traders.
Scalping and Day Trading

Scalping and day trading are ultra-active forex trading strategies that aim to open many positions to profit from small price moves within a single trading day. Positions are held from a few seconds to several hours, but all positions are closed at the end of the day, so nothing is held overnight.

Both styles prevent your positions from being hit overnight by events elsewhere in the world that could heavily affect your portfolio. However, they are two (very) short-term techniques that are particularly stressful and require you to be in front of your screens to seize trading opportunities as they arise.

Currency Carry Trading

The currency carry trade is a strategy that isn’t primarily aimed at profiting from one currency appreciating against another (or vice versa), but rather from the interest rate differentials between the currencies involved. Technically, it means borrowing funds in a low-interest-rate currency to invest them in a higher-interest-rate currency and pocket the difference between the two rates.

For example, suppose you notice that rates are 1% in Europe and 3% in the United States (figures that don’t reflect the current situation). You could make a 2% profit (the difference between the two rates) by borrowing euros and converting them into US dollars, which you then place in investments paying the US rate.

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Trend Strategy vs Breakout Strategy

The two simplest trading strategies are based on trends and breakouts.
Trend Trading

In trading, there are 3 types of trend:

• Uptrend – prices form higher highs and higher lows

• Downtrend – prices form lower highs and lower lows

• Sideways – prices have no real direction and move horizontally

Traders who want to use these trends to trade currencies should also know that there are different phases within an overall trend. For example, EUR/USD may be in an overall uptrend, but prices may currently be falling and retracing part of the upward move before heading higher again.

To use this strategy, traders rely on trend indicators such as moving averages and drawing tools such as channels, trendlines, and support and resistance levels. The hardest part is working out which phase of the trend you’re currently in. This is generally a medium- or long-term strategy.

Breakout Trading

Breakout trading is used in a consolidating market that is about to break out of its sideways range in one direction or the other. You make profits by trading this breakout.

This technique is mainly used short term, taking advantage of the momentum and strength of a price move breaking out of an indecisive market setup. Breakout traders therefore use support and resistance levels or indecision patterns to enter the market.

The Most Reliable Forex Indicators

• Moving Average
• MACD (Moving Average Convergence Divergence)
• RSI (Relative Strength Index)
• Pivot Points
• Bollinger Bands
• Fractals
• Fibonacci Retracements
• Ichimoku Kinko Hyo

Some More Advanced Forex Strategies

There are many advanced forex trading strategies we could discuss here. However, we’ve decided to focus on news trading and arbitrage.

News Trading – Why the Economic Calendar Matters for Following Forex News

As explained above, markets move on news, data and published statistics. Understanding forex as a beginner means understanding that these are often the biggest drivers of short-term price swings — and that you can profit from them with news trading.

When you trade forex on news, you need to follow the calendar to track information such as interest rate changes, inflation, economic growth and employment figures, as well as retail sales and trends in manufacturing and industrial production.

When these figures are released, a news trader mainly looks at three things:

• the difference between the expected and actual figure, since the degree of surprise (positive or negative) usually triggers a big price move
• the difference between the previous figure and the published one
• any revision of the previous figure

Forex Arbitrage – Profiting from Price Differences for the Same Asset Across Platforms

Arbitrage isn’t a forex trading technique for beginners, who should focus on simpler techniques — not to mention that arbitrage models take a long time to set up. However, we’ll quickly explain what arbitrage involves.

So how do you profit from an arbitrage strategy in forex? The most popular arbitrage strategy is to take advantage of a currency pair’s price difference across different brokers, trading that pair to profit from the pricing anomaly.

How to Learn Forex Trading

If you’re wondering how to learn to trade forex, there are many forex for beginners resources you can use: forex courses and online content such as guides to understanding forex, forex technical analysis for beginners, and reviews of forex or FX brokers. However, not all forex courses for beginners are equal. You need to choose a reputable, professional one.

The Best Free Forex Courses

• Forex 101 – Forex and CFD trading course
• From Zero Trader to Pro Trader
• TRADER 007 – In the World of Supreme Trading Tools

Forex Jargon You Need to Know

• Forex technical analysis: Analysis of the past and current price action of currency pairs to identify trends and anticipate the asset’s future direction.

• Forex fundamental analysis: Micro- and macroeconomic analysis of the countries concerned, based on fundamental factors, to determine whether a pair’s intrinsic value points to a buying opportunity (undervalued currency pair) or a short-selling opportunity (overvalued currency pair).

• Ask price: The buying price of a currency pair.

• Quantitative easing: Also known as QE, quantitative easing is used when an unconventional monetary policy is adopted to stimulate an economy. It usually increases the money supply of a currency, which has a negative impact on that currency.

• Central bank: The supreme financial authority responsible for conducting monetary policy in its country to achieve its objectives. It sets an economy’s interest rates and therefore controls the creation and distribution of money in that economy.

• Bid price: The selling price of a currency pair.

• Forex calendar: A forex table listing all the economic, financial and political events that can influence the forex market. Among the most important statistics for forex markets are economic indicators for growth (GDP), employment (unemployment rate), inflation (CPI) and consumer or business sentiment (Consumer or Business Confidence Index).

• Forex CFD: A contract for difference on currencies (if you’re wondering how CFDs work, read our CFDs for Beginners guide).

• Currency carry trade: A trading technique focused on the interest rate differential between two economies (currencies) rather than on a currency pair’s price movement. It involves borrowing funds in a low-interest-rate currency to invest in a currency offering a higher interest rate.

• Quote: The indicative market price of a currency pair, which can be used for information or to open positions.

• Cross rates: Also known as indirect quotes, cross rates use the prices of each currency in a pair against a common currency (often the USD) to determine the pair’s price. For example, to find the JPY/CAD rate, you would use USD/JPY and USD/CAD.

• Direct quote: a currency quote in which one unit of the local currency (here the base currency) is expressed in units of the foreign currency (here the counter currency), such as 1 EUR = 1.20974 USD.
• Indirect quote: the opposite of a direct quote, where one unit of the foreign currency (here the base currency) is expressed in units of the local currency (here the counter currency), such as 1 USD = 0.827387 EUR.

• Forex day trading: A trading style in which the trader buys and sells currency pairs on the FX market within the same trading session. No positions are held overnight.

• Base currency: The first currency in a currency pair. In EUR/USD, the EUR is the base currency.

• Counter currency: The second currency in a currency pair. In EUR/USD, the USD is the counter currency.

• Interest rate differential: In the currency market, the difference in interest rates between two currencies. This concept is central to the currency carry trade.

• Monetary tightening: A monetary policy adopted by a central bank to raise key interest rates and make credit less accessible. It is usually adopted when an economy (or its inflation) is accelerating too quickly.

• Forex leverage: The use of funds borrowed from your broker to increase your exposure to the currency market.

• Exotics: Currency pairs combining a major currency with the currency of an emerging economy, such as the ZAR (South African rand), or of an economy with less international weight, such as the NOK (Norwegian krone).

F

• Flight to quality: Also called flight to safety, this is a phenomenon that triggers large capital flows out of risky assets into safe havens. It happens during periods of high uncertainty or market crashes.

H

• Hedging: A technique that offsets the risk of trading positions held in a portfolio by opening opposite positions. In the currency market, hedging is used to reduce the currency risk of a portfolio of assets in different currencies.

L

• Lot: The standard position size in the forex market, equal to 100,000 units of the base currency. There are also mini lots (10,000 units), micro lots (1,000 units) and sometimes nano lots (100 units).

M

• Margin: Money set aside to open a position with funds borrowed from a broker to enter the market.

• Money supply: The amount of money in circulation in a country.

• Majors: Currency pairs that include the world’s most important currencies, such as the EUR, USD, GBP, JPY, CHF, CAD and AUD.

• Minors: Currency pairs that include major currencies but not the USD, such as EUR/GBP, CAD/JPY or GBP/AUD

• Safe-haven currencies: Currencies that investors turn to during global geopolitical instability or extreme volatility or uncertainty in the stock markets. These currencies usually protect against stock market swings because they represent strong economies. The most popular safe-haven currencies include the US dollar (USD), the Swiss franc (CHF) and the Japanese yen (JPY).

O

• OTC: The over-the-counter market, covering transactions that don’t go through an official regulated exchange.

• Overnight: A position held overnight, or the fee paid to keep a position open from one day to the next.

P

• Pip: The smallest price unit of a currency. Pips refer to the figures added to or subtracted from the fourth decimal place, i.e. 0.0001 (or the third decimal place for pairs including the JPY, i.e. 0.001), which show whether the currency pair is rising or falling.

• Currency pair: Two currencies that make up an exchange rate, such as EUR/USD (euro/US dollar).

• Long and short positions: If you want to profit from rising prices, you open a long (buy) position. If your goal is to profit from falling prices, you open a short (sell) position.

• Monetary policy: The set of actions taken by a country’s central bank to influence the money supply in order to achieve its objectives — often an inflation target of around 2%, stable rates, full employment and the well-being of the population.

• Negative interest rate policy: A monetary policy in which central banks set key interest rates below 0%. In theory, it aims to encourage commercial banks to lend to businesses and individuals in order to support the economy.

S

• Forex scalping: A very active trading style in which a forex trader profits from small price changes in a forex pair by opening and closing positions within minutes.

• Currency swap: A financial transaction that involves exchanging a known amount of foreign currency with another party.

• Spread: The difference between the selling price (bid) and the buying price (ask) of a currency pair. The spread is usually how the broker makes money.

• Slippage: The difference between the price requested by the investor and the price obtained, usually due to changing market conditions in real time. Slippage can be positive (in the investor’s favor) or negative (against them).

• Spot market: Also called the cash market, a market where assets are traded at the price for immediate delivery.

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• Key interest rates: an economy’s main interest rates, set by the country’s central bank.

• Exchange rate: the price of one currency against another. It can be fixed or floating. Floating exchange rates are determined by market forces, while a fixed exchange rate doesn’t change; it is usually set by a government or central bank and pegged to another country’s official exchange rate or to a basket of currencies, such as 1 Bahamian dollar = 1 US dollar. It can also move within a band — the Chinese yuan, for example, has been tied to the US dollar since 1994. The People’s Bank of China (PBOC) steers the yuan against the US dollar within a 2% range around a midpoint it sets against the dollar every day.
• High-frequency trading (HFT): the use of complex algorithms and computer programs to execute trades automatically and very quickly. This type of trading is widely used in the currency market.

Our Final 10 Tips for Trading Forex Successfully

1. Make sure you fully understand the definition of forex
2. Keep learning to understand what’s at stake in the forex market and what moves prices
3. Define your forex trading strategy before you start trading
4. Put good risk and money management in place
5. Always choose a trusted, regulated broker
6. Learn to trade less in order to trade better
7. Understand that nothing is guaranteed in forex trading
8. Accept being wrong and learn from your mistakes
9. Always control your emotions
10. Use a demo account even if you trade live, to get to know the platform better and test new trading techniques (forex trading simulation)
11. Keep a trading journal to analyze your trading process, review your trades and work on your weak points

Do you trade forex? Share your experience and leave us a comment!