The global investment landscape has evolved, with the stock, cryptocurrency, and Forex markets emerging as key focal points for investors. This guide offers a comprehensive introduction to Forex trading, providing readers with insights into key concepts and techniques to navigate this profitable market. Whether you're an experienced trader or just starting, this guide will equip you with the knowledge you need to succeed in the Forex market.
What Is Forex?
The Foreign Exchange Market, or Forex, is where the Euro and US Dollar (EUR/USD) are the world's primary currency pairs and the most popular trade.
How to Make a Profit in Trading Forex?
Forex trading involves trading foreign currencies to profit from the exchange rate. Traders benefit from currency appreciation and depreciation.
There are two ways to profit: buying (Buy) and selling (Sell) currency pairs. Here are the profit-making principles and concepts:
- If you believe the price of the product or instrument you are trading will decrease, place a sell order (Sell).
- If you think the product price or currencies you are trading will increase, place a buy order (Buy).
What Is the Meaning of Leverage?
Leverage is the ability to trade with borrowed funds from the broker, allowing traders to place orders for larger lot sizes. Generally, a $1 investment corresponds to a 1:1 investment with no multiplier.
However, when leverage is used at a ratio of 1:50, traders have invested fifty dollars despite having only one dollar. Using leverage, traders can gain a more significant profit but also increase the risk of potential losses.
What Exactly Are Stop Loss and Take Profit?
- Stop loss (SL) is an order to sell a financial asset at a specific price to avoid large trading losses.
- Take profit (TP) is where traders wish to make gains. When the price reaches the TP level, traders can profit from the desired amount.
Forex Trading Time
Due to the overlap of work hours in each country, the Forex market is open almost 24 hours daily from Monday to Friday. As a result, traders can participate in the Forex market 24 hours a day, seven days a week.