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Your Forex Trading Starter Kit from a Forex Trading Forum for Beginners

Forex trading looks like a lucrative option for making money, but the amount of research and strategy building that goes into it is not visible from the outside. There’s a lot to learn before you can start trading like a pro. If you are just starting your journey in forex, you must be looking for some useful forex trading forum for beginners that can give you all the necessary information. An introduction to forex trading is absolutely essential for a novice. So, let’s start with the basics.

What is forex trading?


The term forex is derived from two words, “foreign” and “exchange.” Foreign here refers to foreign currency, so forex is basically the process of exchanging currencies. This may be done for various reasons, including tourism or commerce, but we are mainly concerned with forex trading.

Forex trading is the trading of currencies in a decentralized global marketplace, which is also called the forex market. In the forex market, all the currencies of the world are traded with each other.

Forex market is, in fact, the largest liquid market in the world where trading continues 24x7. The liquidity and competitive pricing of this market make it one of the most preferred markets for trading.

Difference between forex and stocks?


New traders often have a misconception that forex trading is the same as trading in the stock market. But there are some very distinct differences between forex and stocks. On the basis of volume, nothing beats the forex market. The forex market trades nearly $5 trillion a day. This is much higher than all the stock markets of the world combined which comes to only about $200 billion a day. Such large trading volume in forex makes it easier to get orders executed closer to the desired price.

The forex market is also open 24 hours which means trading can go on in different countries during their respective business hours and trading sessions. So, traders can have access to trading 24 hours a day, five days a week. The stock market, though, has specific trading hours that are controlled by various factors.

Most forex brokers do not charge an extra commission. They make their profits from the spread instead, which is the difference between the buying price and the selling price. When trading stocks, however, traders have to pay the spread as well as the broker’s commission. Some forex traders may charge a commission, though.

But all said, the forex market has a much narrower focus than the stock market. While there are only eight major currencies that forex traders focus on, in the stock market, there are thousands of options.

In comparing the two, forex trading is much more suitable for short-term traders who prefer to trade within the day, opening and closing trades in minutes. It allows them to take advantage of small fluctuations in price, which is not seen in stock trading.

What are currency pairs in forex trading?


Transactions in forex trading involve the simultaneous buying of one currency and the selling of another. These two currencies being traded are known as currency pairs. The most commonly traded currency pair, for instance, is the Euro and US Dollar (EUR/USD).

There is a base currency and a quote currency. The currency listed first in the currency pair is the base currency, and the one listed second is the quote currency.

Terminology associated with forex trading


Pip – A pip is the base unit of the price, or it can be considered as 0.0001 of the quoted price of the currency pair. So, if the bid price for 1 Euro is, say, 1.14978 and the asking price is 1.14998, then the difference is 1.14998 - 1.14978 = 0.0002 or 2 pips. It is used to study the price movements of a currency pair.


Spread – Spread is the difference between the buying price and the selling price of a currency pair. In the above example, the difference between the bid (buying) price and the ask (selling) price is 0.0002, and that is the spread in this transaction.


Margin – It is the money you have left in the trading account when opening a trade.


Leverage – Leverage is the capital, more like a loan, provided by the forex broker to increase your trading volume. Most small-time traders don’t have the necessary margin to trade high volumes, and that is when leverage comes in handy.


Long position – A long position is when you buy a currency expecting its value to increase.


Short position – Short position is when you sell a currency expecting its value to decrease, planning to buy it back at a lower price.


Forex trading platforms


A forex trading platform is software that allows traders to access the forex market online. You can open, close, and manage your trades on the platform. It has several tools, calculators, indicators, and timeframes to help with real-time monitoring and analysis of the market. The most commonly used platforms are MetaTrader 4 (MT4) and MetaTrader 5 (MT5).

This is all we want you to understand thoroughly for now. There’s a lot more that you can learn from a forex trading forum for beginners. But first, let’s concentrate on these few basics, and we’ll come with more interesting and useful information soon.
 
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