There are many reasons to try out Forex trading, some of them are listed below.
You can get extremely big returns in comparison with your initial deposit.
You gain extensive financial knowledge and experience.
You have your own business and depend only on yourself.
You are free to manage your time as you wish.
You don’t need a large amount of money.
You don’t need a degree to become a successful trader.
Please do remember that Forex trading is risky. Only risk capital should be invested into Forex. In other words, trade with money you can afford to lose. At the same time, there is no need to be afraid of the risk. As the trader, you have to take a reasonable risk, which is exceeded by potential reward, and make efforts to decrease risk.
The currencies are often traded in pairs on the FX market. In order to find out the relative value of one currency, you need another currency to compare. When you buy one currency, you automatically sell another currency. Currency pairs in Forex are given in abbreviations. For instance, EUR/USD stands for the euro versus the US dollar, and USD/JPY stands for the US dollar versus the Japanese yen. If you buy EUR/USD, you are buying euros and selling dollars. If you sell EUR/USD, you are selling euros an buying dollars.
A lot is a number of currency units. A standard lot equal to 100,000 units of a base currency/your account currency. It means that if you want to trade EUR/USD, you will need $100,000. There are two other well-known lot sizes. They are a mini lot (equal to 10,000) and a micro lot (equal to 1,000 units).
A great benefit of trading at the Forex market is leverage. As we already said, a standard lot is $100,000, it’s a huge amount. However, your broker can help you. The standard lot is big but there are other types of lots. So, if you trade 0,01 lot on the cent account that equals 1,000 units, to open a trade of 0.01 lot you need only 10 euros. With the leverage of 1:10 you will be able to open 0.1 lot trade investing the same amount of money but getting bigger profit.
Reading analytic articles or news you definitely saw such phrase “the pair rose/declined by … pips”. What is the pip and how does it affect the amount of money you earned? A pip means “Percentage in Point”. It represents the smallest change a currency pair can make. Usually, a pair is counted in four decimal points, for example, a quote of GBP/USD is given like this: 1.3463. However, there are some pairs that have 2 decimal points. For example, the US dollar/Japanese yen is quoted as 109.70. A pip is represented by the last decimal of a price/quotation.
A candlestick is a chart, also known as a Japanese Candlestick Chart, and is favored by traders due to the wide range of information they portray. The chart displays the high, low, opening and closing prices. A candlestick has three points; open close and the wicks. The wicks show the high to low range and the 'real body' (wide section) shows investors if the closing price was higher or lower than the opening price. If the candlestick is filled then the currency pair closed lower than it opened. If the candlestick is hollow, then the closing price is higher than the opening price.
AA bar chart shows the opening, close, high and low of the currency prices. The top of the bar represents the highest paid price and the bottom indicates the lowest traded price for that specific time period.
A line chart is easy to understand for forex trading beginners. In a line chart, a line is drawn from one closing price to the next. When connected, it is easy to identify a general price movement of a currency pair throughout a time period and determine currency patterns.