Learn Forex Trading Online

The idea of forex trading may be fascinating to you but also seem complex. Yet if you have a firm grasp on the basics of it you will find it is easier than you initially though. As automated forex robots and managed forex are getting even more popular, more and more people will be taking advantage of forex.

So let’s go through the basics here. Do you know what currency pairs are? If not then that is a good place to start learning the basics of forex trading. That is because all forex currency trading takes place with currency pairs. There are for main combinations you will be working with – EURUSD, GBPUSD, USDCHF, and USDJPY.

Currency pairs

Any currency price that you see on a chart will be in such currency pairs. The first currency is called the base currency and the second one is called the counter currency. When you see EURUSD 1.2728 it means that 1 euro will buy that much in US dollars. Almost all of the most frequently traded currency pairs include US dollars. The majors are the typically the ones that have the greatest liquidity and trading occuring.

Majors, cross rates, and exotics

The non majors fall into a category known as cross rates. They often include one of the other very popular forms of currency though including the euro. Those that involve two types of currency that are very unusual to forex trading are known as exotics. You do need to be careful with them as they aren’t liquid investments. They also involve a bigger spread than you may be willing to work with.

Face value

The face value of a currency pair refers to how much of the base currency you intend to trade. This is a very important concept when it comes to the world of forex. The platform you use for trading will ask what your face value is and so it is essential that you have the right information to enter. Otherwise errors will occur and it could end up costing you more money than you had planned to invest.

Pips

Pips is a term often associated with Forex trading. This is another term for points. As the chart for the currency pairs changes there will be movement. A pip means that there has been movement in the last decimal point of the currency pair you are looking at. In terms of profit, pips is used to refer to that rather than the base currency. For example, if the EURUSD is currently 1.2728 and it moves to 1.2738, there has been a 10 pip move.

Time frames

This refers to the types of forex charts that you are using, specifically the time frame. For example, you can look at hourly charts where every bar or line represents 1 hours worth of activity, the high and low. However, some traders trade the 5 minutely charts, which means that a new bar is formed every 5 minutes. This requires quicker application of your forex system rules.

These are just a few of the terms that you will hear again and again in regards to Forex trading. The more you understand each of them and how they affect your investments the more successful you will be. Too many individuals invest without having any understanding of these elements. And your options include traditional forex trading and automated forex trading with robots.

As you read about forex or currency trading, make note of any terms you don’t understand. That way you can look up the information later on. Don’t assume you know what is meant by the terms or you could end up making mistakes that cost you money down the road. A good sound knowledge is the first step in forex trading of any kind.

Author: Mark Hamburg
Article Source: EzineArticles.com
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