Beginners Guide to Forex Trading

LEARN TRADE CONNECT
Beginners Guide to Forex Trading
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Table of Contents
High Risk Investment Disclaimer 3
Basics of the Exchange Market 4
Basic Terminology 5
Forex vs. Stocks 6
Parts of a Pair 8
How are Currency Pairs Measured 9
Earn from the Bulls & Bears 10
Trading Styles 11
Basic Quote Mechanics 12
Placing a Trade 13
Currency Pairs 14
Leverage Your Trading 15
Managing Risk 16
Why should you trade Forex? 17

Trading foreign exchange on margin carries a high level of risk, and may
not be suitable for all investors. The high degree of leverage can work
against you as well as for you. Before deciding to trade foreign exchange
you should carefully consider your investment objectives, level of
experience, and risk appetite. The possibility exists that you could sustain a
loss of some or all of your initial investment and therefore you should not
invest money that you cannot afford to lose. You should be aware of all
the risks associated with foreign exchange trading, and seek advice from
an independent financial advisor if you have any doubts.
High Risk Investment Disclaimer

Basics of the Exchange Market
What is Forex?
The foreign exchange market, commonly known as the Forex market, is
the largest financial market in the world. The Forex market has a daily
trading volume of $5 trillion!
How do you trade a currency?
How do these trades work?
You as the trader can buy or sell a currency pair, gaining or losing based of the
difference of the exchange rate from when you open and close the trade.
Value of a currency is always relative to another currency. One pair relative
to another is known as a currency pair. Once paired together the two create
a value known as an exchange rate. You as a trader will trade the exchange
rates as they fluctuate.

Basic Terminology
Long Placing a buy order on a currency pair.
Short Placing a sell order on a currency pair.
Leverage
The concept of controlling large amounts of capital with a smaller initial
deposits.
Spread The difference between the bid and ask prices.
Margin The capital required to trade a certain currency pair.
Lot
Standard unit of measurement for trades. A mini lot is equivalent to
1000 units of a currency pair, while a standard lot is 100,000 units.

Forex vs. Stocks
Forex Stocks
NO commissions on trades.
Brokerages charge you
commission on every trade.
Open an account with as
little as $50
Many brokerages require at least
$2,000 to open an account
Trade in any direction of
the market.
Brokerages require high capital
account to allow you to short trade
Market is open 24 hours a
day 5 days a week.
Market is open less then 7
hours each days.
No capital requirement for
leveraging trades.
Trader must meet strict margin
requirements in order to
leverage trades.

Forex vs. Stocks Continued…
No Commissions
Most Forex brokers allow you to trade without commissions and there are no additional fees.
The only cost the only cost a trader pays is the difference between the bid and ask price,
which is deducted in the trade.
Open an Account with Minimal Capital
You can open a trading account with as little as $50, although it is not highly recommended.
24-Hour Market
As opposed to the stock market which is only open for 7 hours a day, the Forex market
remains open 24 hours per day giving traders more opportunities to trade throughout the day
Leverage
You can trade Forex with leverage up to 50:1 margin and some brokers with 100:1. This allows
you to trade with $1,000 position in the market by placing only $20 in the position. Can take
advantage of the smallest moves in the market.
High Liquidity
Forex is the largest market in the world. There are always a lot of people trading which makes
it easy to get into and out of a trade.
Globally Connected
Since Forex is the largest financial
market in the world, there are always
trading opportunities. Many factors
affect the Forex market, from interest
rate decisions to unemployment rates.
This allows traders for opportunities to
capitalize on these changes of price
due to these factors.

EUR/USD = 1.3510
Base Currency Quote Currency
The number 1.3510 above indicates how much is needed of the quote currency to buy
one unit of the base currency. So in this case, it takes 1.3510 U.S. Dollars to buy 1 Euro.
There are two parts to a currency pair: the base currency and
quote currency.
Parts of a Pair

How are Currency Pairs Measured
A pip is the unit of measurement for trades in Forex. In pairs involving the
Japanese Yen(JPY), a pip is 1/100th place or 0.01. In all other currency
pairs, a pip is the 1/10,000 place or 0.0001. For example, if EUR/USD rises
from 1.3258 to 1.3298, EUR/USD has risen 40 pips.
Increase of 40 pips in one day
1.3258
1.3298
U.S.
Dollar
Euro
EUR/USD- Euro vs. US Dollar(From Wednesday January 12, 2014-Thursday January 13, 2014)
Wednesday
Thursday
In this 24 hour time frame the Euro appreciates in
respect to the U.S. Dollar. This is always happening in
Forex because exchange rates are constantly
changing. This always gives traders the opportunity to
make a trade, whether it be 12:00pm or 3:00am.

Earn from the Bulls & Bears
The Forex market gives you the opportunity to “go long” or “go short”. If
you think you a currency pair will appreciate you can buy it or “go long,”
earning from a bull market. If you think a currency pair will depreciate
then you can sell it or “go short,” earning from a bear market.

Trading Styles
Day trading is a trading style in which positions are typically opened and closed during
the same day. Day traders analyze the markets at the beginning of the day and
monitor it throughout the day. Day traders intend to profit from the short-term
fluctuations of the market and never leave a position open overnight.
Swing trading is a trading style in which positions are typically held for several days at a
time. Swing traders intend to profit from short term swings and trends in price. In
addition look to predict price range peaks and troughs for buying and selling points.
Swing traders intend to profit from intermediate trends in the market.
Position trading is a trading style in which a trader holds a position for the long
term(from weeks to years). Position traders intend to profit from the long-term trends in
the market. Analysis may be directed more towards long term price trends in sync with
fundamental economic changes.
Day Trading
Swing Trading
Position Trading

Basic Quote Mechanics
BID ASK
Spread
A Bid price is the price at which the market is prepared to buy a specific
currency pair. This is the price that the trader sells at.
An Ask price is the price at which the market is ready to sell a
specific currency pair. This is the price that the trader buys at.
The difference between the Bid and Ask is known as the Spread.

Placing a Trade
Dec 2013
Feb 2014
GBP/USD
If a trader went “long” or bought this currency pair in December and
closed the order in February then he or she would have made a profit!
In this example the capital risked is the whole $1000. Now imagine actually
trading in the forex market with leverage. You would have made a $228
profit with only risking around $20 of your own money.
Placing a trade in forex can be seen as the same
as traveling internationally. Lets say you traveled
on December 2012 to Great Britain. If you were
to exchange $1000 US Dollars (USD) you would
have received £763 British Pounds (GBP) in
December. After two months you go to the USA
and exchange your £763 pounds for US Dollars at
an exchange rate of 1.6100. You would receive
$1228 US Dollars. You would receive $228 more
US Dollars then you had before just because the
value of the pound appreciated in relation to the
U.S. Dollar overtime.
=1.6100
=1.3100GBP/USD
GBP/USD

Currency Pairs
In Forex, traders look at trading the most liquid pairs. These are currencies
which are paired with the US Dollar, known as the “Majors”:
Currency Pair (paired with USD) Nickname
USD Euro
GBP British Pound
AUD Australian Dollar or “Aussie”
NZD New Zealand Dollar or “Kiwi”
CHF Swiss Franc
JPY Japanese Yen
CAD Canadian Dollar
“Major” Currency Pairs
Major pairs have a high traded volume and liquidity. Also, the “spread”
or commission the trader has to pay is usually less than exotic pairs.

The chart gives can give you an idea for how much capital is
needed to manage different position sizes.
Currency Pair Unit Size Deposit
EUR/USD 1k $30
EUR/USD 10k $300
EUR/USD 50k $1,500
EUR/USD 100k $3,000
…Think again
Leverage Your Trading
Think you need a lot of money to open a position?...

Managing Risk
Risk management is crucial to becoming a winning trader. Those traders who lose
there accounts are those who over look risk management. Proper risk management
is the key to success in Forex. Basic concepts you to help you manage the risk in your
position are as follows:
Limit
Stop Loss
Choosing your correct position size
A limit order allows you to place a price limit in the direction of your trade at a
specific price which permits your trade to close once the limit is hit, taking profit. .
A stop loss allows you to place a price limit in the opposite direction of your
trade at a specific price which permits your trade to close at that price limit in
case the trade goes the opposite direction of what you predicted.
This is based on the risk-reward ratio. The risk-reward ratio is the amount you are
willing to lose and the amount you reasonably expect to make. A common ratio is
1:2 or 1:3. This means your are risking 2x or 3x less than what you expect as your
reward.

Take Advantage
of FXC’s
Learning Tools
Online Classroom
Critiqued Trades
Tuition Rebates
Coaching
Social Feeds
Why should you trade Forex?
24 – hour
Market
Go Long or
Go Short
Instant Order
Execution
Low Capital Requirement-open
an account with as little as $50
High
Liquidity
Leverage
-Leverage trades up to 50:1 so you can capture
the small moves in the market

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Beginners Guide to Forex Trading

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