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Introduction to FOREX [THREAD]
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Forex is short for foreign exchange which is the exchange of currencies.
In forex, you trade one currency for another.
Forex is quoted in currency pairs.
Each currency is given a 3 letter code.
In forex, you trade one currency for another.
Forex is quoted in currency pairs.
Each currency is given a 3 letter code.
EUR - Euro
USD - US Dollar
GBP - British Pound
JPY - Japanese Yen
CHF - Swiss Franc
AUD - Australian Dollar
CAD - Canadian Dollar
NZD - New Zealand Dollar
USD - US Dollar
GBP - British Pound
JPY - Japanese Yen
CHF - Swiss Franc
AUD - Australian Dollar
CAD - Canadian Dollar
NZD - New Zealand Dollar
The 7 more common and liquid pairs are:
EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD, NZD/USD and USD/CAD
EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD, NZD/USD and USD/CAD
Currency Exchange Rates
Currencies are quoted in pairs and mostly in 4 decimal places.
For example,
EUR/USD = 1.3505
EUR = Base currency
USD = Quote Currency
The base currency always has a value of 1.
In this case 1 EURO = 1.3505 US dollars
Currencies are quoted in pairs and mostly in 4 decimal places.
For example,
EUR/USD = 1.3505
EUR = Base currency
USD = Quote Currency
The base currency always has a value of 1.
In this case 1 EURO = 1.3505 US dollars
If you want to buy 1 Euro, you would pay 1.3505 USD.
If you want to sell 1 Euro, you would receive 1.3505 USD.
While all others pairs are quoted to 4 decimal places
(1 pip = 0.0001), the JPY pairs are quoted to 2 decimal places (1 pip = 0.01)
If you want to sell 1 Euro, you would receive 1.3505 USD.
While all others pairs are quoted to 4 decimal places
(1 pip = 0.0001), the JPY pairs are quoted to 2 decimal places (1 pip = 0.01)
For example,
USD/JPY = 98.73
USD = Base
JPY = Quote
This tells us that 1 USD is = to 98.73 Japanese Yen
USD/JPY = 98.73
USD = Base
JPY = Quote
This tells us that 1 USD is = to 98.73 Japanese Yen
PIP (Price Interest Point)
A pip is the smallest change in value for any given forex quote.
For all non-JPY forex pairs, 1 pip represents the 4th decimal place of the quote.
When the EUR/USD moves from 1.3505 to 1.3506, it is a movement of 0.0001 of 1 pip.
A pip is the smallest change in value for any given forex quote.
For all non-JPY forex pairs, 1 pip represents the 4th decimal place of the quote.
When the EUR/USD moves from 1.3505 to 1.3506, it is a movement of 0.0001 of 1 pip.
For JPY forex pairs, 1 pip represents the 2nd decimal place of the quote.
When USD/JPY moves from 80.55 to 80.87, it is a movement of 32 pips.
When USD/JPY moves from 80.55 to 80.87, it is a movement of 32 pips.
Contract Lot Sizes
A standard lot is 100,00 units of the base currency
A mini lot is 10,000 units of the base currency
A macro lot is 1,000 units of the base currency
A nano lot is 100 units of the base currency
A standard lot is 100,00 units of the base currency
A mini lot is 10,000 units of the base currency
A macro lot is 1,000 units of the base currency
A nano lot is 100 units of the base currency
Calculating Forex Profits
Profit/Loss =
Number of pips x Number of lots x $ Value per pip per standard lot
$ Value Per Pip Per Standard Lot is about $10 USD
Profit/Loss =
Number of pips x Number of lots x $ Value per pip per standard lot
$ Value Per Pip Per Standard Lot is about $10 USD
The Power Of Leverage
In forex, brokers allow traders to leverage up to 1:500.
This means you can buy/sell USD 100,000 with only 1,000 USD margin.
In most trading situations, we usually only leverage up to 1:50.
In forex, brokers allow traders to leverage up to 1:500.
This means you can buy/sell USD 100,000 with only 1,000 USD margin.
In most trading situations, we usually only leverage up to 1:50.
Leverage = 1:10 | Margin Required = 10%
Leverage = 1:50 | Margin Required = 2%
Leverage = 1:100 | Margin Required = 1%
Leverage = 1:50 | Margin Required = 2%
Leverage = 1:100 | Margin Required = 1%
4 Types Of Forex Traders
1. Scalpers
2. Day Traders
3. Swing Traders
4. Position Traders
1. Scalpers
2. Day Traders
3. Swing Traders
4. Position Traders
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