Forex trading for beginner

Thu, Jul 13, 2023 1:49 PM 08:38 English (US) Over the course of the next few minutes, we're going to go through some of the basics of the foreign exchange market, how it works, how people trade it and what makes currency pairs move.So in this latest video with trading two and two, what I thought we'd do is take maybe something of a step back and I apprec

iate plenty of people are quite familiar with foreign exchange trading, but for some people, it might be a new thing. So we'll do a few minutes just explaining how this market works. Um When you're trading, what you're actually trading and what makes uh currency pairs move. Now. First of all, foreign exchange market, it's the biggest market in the world bar.None, it trades trillions of dollars a day around the clock. So it appeals to both traders who are trading small size and larger size because it's relatively easy to get your trades filled. And the cost of doing business is much lower when compared to other markets with currency markets, no currency moves in isolation. So we have the idea of of currency pairs, one currency quoted against another. So to make sense of this, let's take a quick look on the platform. So we're on the trading two on two platform. Let's click the search tool up here, top left and see what's available to trade. Let's click on currencies now. So here's the list of various currencies, Australian dollar, Canadian dollar Swiss, Franc Czech Corona. And so it goes on. So there are potentially hundreds of permutations we could trade. For example, if we go down to here the PLN Polish Lotty, if you wanted to, you could take a view on the Polish Lotty against the Japanese Yen, Polish Lotty against the Mexican pesos.So there are all sorts of combinations you can do here. What most people tend to do in the beginning at least is stick to the major markets that the major currency pairs because there's normally plenty going on in those markets. And with trading 212, if you're trading 25,000 units or less, you can trade these with zero spreads. So let me just highlight these by typing in zero at the top. So there we go, the most popular market.Euro dollar, then we have the other majors dollar, Japanese yen, pound us dollar and the dollar against the Swiss franc. So when we're looking at currencies and currency pairs, it's all about relative value is one currency stronger or weaker than another currency. And to get an idea of this, let's take a look at how one currency pair has moved over recent months. So all the currency pair is showing is the relative value of one currency versus another.So if we're looking here in this example, pound us dollar, we can see at the beginning of 2017. So January 2017 £1 would buy you around about $1.22. At the beginning of September, the pound had risen in value and £1 would buy you $1 and, and almost 32 cents.So when we're, when we're looking at Forex pairs, foreign exchange trading, uh we're looking at the value of one currency versus another now because we have currency pairs. I think it can be a bit confusing in the beginning for some people when they click and they buy dollar yen or what am I buying? Am I saying? The dollar is gonna go up? Am I saying the yen's gonna go up?It's understandable why this is confusing to some, but it's really easy I think to understand. So again, let's take a quick look on the platform to understand when we're trading. What direction are we actually trading in? When it comes to direction trading. It's really easy. Like I said, it can be a bit confusing for people in the beginning. But the way to remember if you buy, pound us dollar, it's the first quoted currency in the currency pair that you're buying and selling, buying or selling.So if I buy pound us dollar, I'm speculating that the pound is going to go up. It means this chart is going to go up and correspondingly the US dollar is going to fall. So the pound's value is going to increase against the US dollar. So for example, if I had bought down here, bought Pound US dollar at the beginning of the year, and we're still holding the position, I'd be sitting on a reasonable profit if I thought the pound had gone up too far.And I think like the market is going to fall. How do I profit from this or how do I try and profit from this, the way to do it? I would click on sell, I would sell pound against the US dollar. So I'm speculating the value of the pound is going to drop and this chart is going to turn lower. OK. So that's the, that's the rule of thumb when you're buying or selling, it's the first quoted currency that you're buying or selling against the other one.So if we sold the dollar against the Japanese Yen, we're speculating that dollar yen is going to fall. So the dollar is going to fall and the yen is correspondingly going to rise when it comes to trading hours. Foreign exchange market is a true 24 hour market. So it starts off Sunday night UK time when the Asian markets open for business and it trades all the way around the clock till Friday evening when New York finishes off for the weekend. Then on Sunday, the whole thing starts again.Um, but you don't need to be intimidated or worried by this 24 hour market. Let's, let's take a look at some of the moves that we see and how we might want to trade it. Here's a snapshot of a few days pounding against the dollar where each of these candlesticks represents 10 minutes worth of trading. So going back to the fifth of September and ending up at the end of that particular week on the eighth of September.So we can see, you can see from the scale just down here that this is a 24 market. For example, this section here we've got from 11 o'clock UK time, Asian trading kicks in the market moves higher, then we have sort of 7 to 8 in the morning UK time when the focus shifts to Europe and the market continues to rise in this example.And then we have us time.So from about 56 o'clock in the evening UK time, the focus is very much on the US and we had something of a quiet finish, but don't be, I think worried about this being a 24 hour market, you know, thanks to losses and take profit orders, you can set up your trade. So if a certain level gets hit, you come out for a small loss or you come out for the profit, you're expecting just because it's a 24 hour market.You don't need to watch these markets around the clock, sitting there in your pajamas with matchsticks holding your eyes open. You know, you can use orders to manage the risk for you when you're trading for an exchange. I think like so many other products these days you're trading using leverage. So even though you might have, let's say $100,000 position in one currency, you don't actually tie up the whole amount because traditionally currencies don't move that much during the day. You're trading using leverage. 00:06:50 - Speaker 0 So you may only have to put up half a percent or 1% value of the position. You have a situation where a small sum of money can control a much bigger financial position, of course, that gives you the potential for for greater profits.But hand in hand with that goes the risk of bigger losses, which is why it's important I think to manage the risk using stop losses. And we've done plenty of videos about how you might want to use stop losses. 00:07:16 - Speaker 0 The last thing we might want to look at is what moves foreign exchange payers. The short answer and maybe not too helpful is potentially everything can have an impact on the currency markets. You know, from things like interest rates.For example, if the interest rates in one country are higher than the interest rates in another country that can make that currency appealing, but hand in hand with that sometimes higher interest rates mean maybe a weaker economy so that can make money flow.