Learn Forex

How Forex Market Works

This article will be a basic forex trading guide (divided in different parts) where beginners will find all the information needed to trading forex. It is important to have a solid background because ‘invest safely’ means to have a good basic knowledge to make money with forex.

Before starting, though, we need to do a necessary premise: to earn on forex you have to choose very carefully the platform to use. Not all platforms, unfortunately, are equal. There are very useful platforms and there are the ones who cheat customers. In this case, all the forex trading strategies are not useful. The choice of secure platforms, authorized, honest and affordable is an important starting point.

All beginners should know that forex means trading on the bigger currency exchange market in the world, where every day is exchanged almost $ 3 trillion. We can say that Forex market, or simply FX is based on the world’s currencies trade.

Among the most traded currencies pairs there are: EUR / USD; EUR / JPY; USD / JPY; GBP / CHF and CAD / USD.

To have a gain, the trader has to be able to determine which currencies can undergo depreciation and which can have a reassessment. Online forex software is able to provide the prices of currencies in real time. Everything has to be connected to one of the many forex trading strategies for beginners.

Prices are generally expressed with a five-digit number. For example, EUR / USD = 1,1120 means that one Euro is valued 1,1120 US dollar (then you will be paid that exact number of dollars in the process of selling or buying the currency).

When prices undergo a change and for example the EUR / USD change from 1,1120 to 1,1125, there is a variation of 5 point, and in this case there is an appreciation. In the case the EUR / USD value changes from 1,1120 to 1,1115 there is 1-point variation and it is called depreciation.

To start trading you need to open an account with one of the best forex broker that you can find on our site. Each participant in the forex market can enter either as a seller or a buyer of a particular currency. During the exchange process, the purchase price of a currency is always higher than the sale price.

‘ASK’ is the purchase price and ‘BID’ is the selling price. If you think that the value of currency can increase, the strategy to adopt is to buy at a certain price, and then sell (SELL) when the value is higher.

If you open a position (‘OPEN’) by buying EUR / USD and want to close it immediately (‘CLOSE’), you will gain nothing and have only a loss. To have a profit you will need to operate in anticipation of an appreciation or depreciation of the currency, moving in the right direction whether you want to buy or sell.

You just have to start trying, also with a demo account, because there is no better school of practice.

Read more about Forex Technical Glossary.

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