FOREX Trading for Beginners

To operate in the Forex market, it is necessary to be clear about certain basic concepts. You must also know some specific indicators and tips because it is impossible to profit from the movements in the currencies without them. After all, we will not understand how they work. The Forex market has certain characteristics that other markets do not have, such as quotation units. As you may know, stocks are quoted in a currency, such as dollars, pesos, or euros, and stock indexes are quoted in points. But what about currencies?

To start becoming a Forex trader, opening a demo account and practicing basic concepts is best.

Only then will you learn the more advanced things, such as executing a one-minute scalping strategy.

What is the Pip?

The pip is the basic unit of measurement of an exchange rate. It comes from the acronym Point in percentage. The pip is the fourth decimal place of an exchange rate. In the Forex market, it is common to see exchange rate quotes with five decimal places. The pip will be the unit that will indicate how much we have gained or lost, depending on how much we have bought or sold. The pip is also used to measure price movements. For example, if an exchange rate goes from 1.05640 to 1.05650, we will say it has gone up one pip. Simple right?

How do you read an exchange rate?

As we have already explained above, in Forex, you sell one currency to buy another. The quotes are in currency pairs, i.e., one currency is quoted against the other. So the exchange rate is composed of two currencies: the base currency and the secondary currency.

The base currency will always be the one in the first position. The base currency is the one that marks the nominal of the operation, that is to say, how much money we are moving in the market, and it will help us to know our degree of leverage (which we will explain in future posts).

The secondary currency will always be the one in the second position. For example, in the exchange rate that crosses the Euro against the Japanese Yen, the Eur/Jpy, the Japanese Yen is the secondary currency. The secondary currency is the one that marks the value of the pip. Depending on the amount that we have bought or sold, the pip will be worth more or less monetary units of the secondary currency.

What is a Lot?

Another basic concept that you must master to be a successful scalper is that of lots. The lot is the standard measure of trading in Forex, and it would be the equivalent of the contract in the Futures market. In addition to lots, mini-lots and micro-lots can also be traded. The characteristics of these are as follows:

  • With a lot, the nominal of the operation is 100,000 monetary units of the Base Currency, and the pip goes to 10 monetary units of the Secondary Currency.
  • With a mini-lot, the nominal of the operation is 10,000 currency units of the Base Currency, and the pip goes to 1 currency unit of the Secondary Currency.
  • With a micro-lot, the trade nominal is 1,000 currency units of the Base Currency, and the pip goes to 0.10 currency units of the Secondary Currency.

In short, Forex for beginners requires patience in following a consistent strategy. If you want to know more about Forex day trading in Miami, sign up for our course now: https://www.trendtrading.academy/purchase-basic-membership 

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