Forex Fundamentals
Forex Fundamentals
Forex Fundamentals is the essential key for learning the Trading in Forex Market. If you are getting bored with your 09 to 05 Job. then you should at least learn something new skills, and Forex is one of them.
if you are interested in Forex Trading, you must know the answer to the Question:-
- What is Forex Trading?
- Why Forex Trading is used?
- How to do trade in Forex Market?
What? Why? How?
What is Forex?
Forex means [ "For = Foreign" + "Ex = Exchange" ] Foreign Exchange.
It is also known as Currency Market, Money Market also. In this Market, traders can exchange the currency lots. For Trading in Forex, Forex Brokers provides huge margin money up to 3000% for trading. so that Traders can trade easily. because the Lot Size in the Currency Market is quite large. we have discussed lot sizes in detail here.
Forex Market is a De-Centralised Trading Market. In which group of Banks, Brokers, Financial Institutions trades with help of Currency Exchange Registers. So that there will be a chance of a little currency exchange rate difference in different platforms at the same time. but this is a very nominal difference.
Currency Exchange Rate can be following Types
- Fixed Currency Exchange Rate
- Floating Currency Exchange Rate
- Mixed Currency Exchange Rate
Why Forex Trading is used?
Forex Trading is the essential milestone in International Import-Export currency conversion for businesses and individuals consumers.
For Example, Suppose you are a website developer in India and you have worked for a USA client. This USA client sends you a payment of $6000 US-Dollars($) through his bank situated in the USA. then USA Bank transfer this USD payment to India Local Bank and India Local Bank converts this USD into INR with a currency rate of USDINR.
Thus, Banks are the major players in the Forex Market who performs Trades of Huge Amount of Buy and Sell. Approximately 2500 Big Banks participate in Forex Market on daily basis.
Forex Market performs trades of 06 trillion per day. which is more than the sum of stock market trading of entire worlds.
How to do trade in Forex Market?
You can trade in Forex Market as a retail Trader. Before starting the trading in Forex Market. You must go through these points.
- Who Trades in Forex Market?
- Which assets are required for Trading in Forex?
- What are the Basic Terminologies of the Forex Market?
- How to place my first Trade in Forex Market?
- How to Get Profit from Forex Trading?
We discuss all of these points one by one.
Who Trades in Forex Market?
Forex Market has the following Entities which perform trades as per their requirements and goals.
- Public and Private Sector Banks - These Banks convert the transaction of their clients in the Forex Market and they also perform Trading on the Basis of "Deep Dip". Banks perform trades with large volumes and they have the power to manipulate the short-term change in the current market trend. So Banks put their trades in small bunches to achieve more profitability.
- Financial Institutions and Forex Brokers - These Companies either Financial Institutions or Forex Brokers also perform Trades for direct profits and hedge their assets. In the case of Forex Brokers, they hedge their position for managing the risk of losses due to margin levels given to their registered Forex Traders.
- Retail Consumer Traders - Common Traders, comes under this category. Retail Consumers trades with the help of Forex Brokers. These Traders perform trades only for making profits from Forex Market. They try to analyze Forex Market using different Trading Strategies, Trading Indicators, Forex News, etc.
Which assets are required for Trading in Forex?
For Trading in Forex Market, Traders need the following assets or resources.
- Money - Yes, Money is the Most Important for Trading. You need at least $100 for Trading in Forex. Because if you Start real Trading below $100, you feel depressed while hitting stop-loss or booking loss in Account. (In case, you want to do practice only you can open a "Cent" or "Micro" Account with your Forex Broker. which requires only a $10 investment.)
- Forex Trading Account - You need a Forex Trading Account for Trading in Forex Market. which can be open easily with any Forex Broker by giving Identity Proof. Forex Broker provides you both Real (For Trading) and Demo(For Practice) Account.
- Computer or Mobile - For Placing Buy or Sell orders in Forex Market, you have to arrange a computer, laptop, or mobile. because you can put your trades in Forex Market using the Software or App named as "MetaTrader" or Official Website or App of your Forex Broker.
- Internet Service - Forex Trading requires a decent Internet Connection Speed. Because Forex Market movement is fast. You may get the nearest Trade price for the desired Order (Buy or Sell) if Internet Speed is Good. Slow Internet Speed makes the loss of Some "PIPS". which make the difference up to $100 profit or loss in large lot sizes.
- Bank Account - You must have a bank account for deposit and withdrawal money into Forex Trading Account. Kindly try to open different Bank Account for Forex Trading because It will be easier to file Income Tax and Legal formalities and your daily work will not affect in case of a bank account freeze by the bank due to a higher amount of transactions.
- Learning Resource - You need some learning resources for Improving your Trading Styles, evaluation of Stop-Losses, etc. It can be Free or Paid. As a Free Option, you can use YouTube, Websites, and Udemy also. For Paid Mentorship, you can use Forex Masters as per your Interest and Budget. It is better to give some money to Trainer rather than Forex Market losing Trades. So You must practice under some Experience Trader who can be your Friend, Family Member, or Mentor (Trading Guru).
What are the basic terminologies of the Forex Market?
Suppose! you are learning "How to Drive a Car?" then you must familiar with the components of Car. like-
- Clutch
- Break
- Accelerator
- Engine
- Fuel - Petrol/Diesel
- Coolant
- Seat-Belt
- Wipers, etc.
Similarly, you should familiar with the following Terminologies. Before Trading in Forex Market.
Forex Basic Terminologies are as follows:-
- ASK - Price available for Buy Order.
- BID - Price Available for Sell Order.
- Spread - Difference of ASK and BID Price.
- Lot Size - Bundle of Currency [1 Standard lot = 100,000 units]
- Stop-Loss (SL) - Price level for Exit from Current Trade with Loss booking.
- Take Profit (TP) - Price level for Exit from Current Trad with Profit booking.
- Bulls - Traders, who want to increase the price by Buying.
- Bears - Traders, who want to decrease the price by Selling.
- Bullish Market - Bulls has dominance in the Current Market.
- Bearish Market - Bears has dominance in the Current Market.
- Trend - Pase of Market in a certain direction.
- Charts - Detail in 2D Canvas for Price changes as per the Time and Date.
- Timeframe - Timeframe is the value at which Chart X-axis (Time) is divided.
- PIP - "Percentage in Point", is the smallest price change in Currency.
- Leverage - Margin percentage/ratio offer by Forex Broker for Trading in Forex Market.
- Support - Price level, which is preventing the further decrement in price.
- Resistance - Price level, which is preventing the further increment in price.
Types of Charts (Generally Used)
- Line Chart - (Used By Elliott wave Experts Mostly)
- Bar Chart -
- Candlestick Chart - (Recommended to Use)
Types of Trend
- Up-Trend - The market is moving in the direction of Increasing Price levels.
- Down-Trend - The market is moving in the direction of Decreasing Price levels.
- Sideways-Trend - The market does not have any clear Trend.
Types of Timeframe
- 1 Minute
- 5 Minute
- 15 Minute
- 1 Hour
- 4 Hour
- Day
- Week
- Month
We generally use 5 Minute, 15 Minute, 01 Hour Timeframe for Trading in Forex.
How to place my first Trade in Forex Market?
Forex Market Trading can be done using the following options:-
- MetaTrader Software (Recommended for Serious Traders)
- MetaTrader App (For Beginners and Experts Traders)
- Web Terminal provided by Forex Broker
- App Platform provided by Forex Broker
Complete MetaTrader Software Guide in Hindi
MetaTrader Software
MetaTrader Software is developed by "MetaQuotes Limited". This is the best way for Forex Market Trading, Yes it may be possible if you are already familiar with some other Charting software of "TradingView" or "Investing.com". you could feel that Graphical User Interface (GUI) is quite Classical. But believe me, it can benefit if you start learning from here.
The versions of MetaTrader Software
- MetaTrader4 (MT4) - released in year 2005 and continues updating. still in use.
- MetaTrader5 (MT5) - released in the year 2010 and most widely used.
Requirement for MetaTrader Software
- Windows XP/ Windows 7/ Windows 8/ Windows 8.1/ Windows 10
- Display Resolution - 1024 X 768
- Internet Speed - 40kpbs or more
Where to Download MetaTrader Software?
You can download MetaTrader Software with the Official Website of MetaTrader4 or the Offical Website of MetaTrader5 and Your Forex Broker Website easily.
Links For MT4 and MT5 Android App are as follows:-
Links For MT4 and MT5 Apple iPhone App are as follows:-
You will find the user interface as below after Installation of MetaTrader Software:-
For Placing Your First Trade, Kindly open A Demo Account with your Forex Broker or you can open a demo account with MetaTrader also. When you install this software it will ask you to open a new demo account or login into an existing demo or real trading account. So you can choose as per your trading requirements.
Open Demo Account First for Start Trading in Forex. It is recommended.
Now, We are ready to place your first Forex Trade into your Forex Trading Account.
Step #1 - Choose your Trading Currency. for Example - EURUSD
Step #2 - Select Time Frame as per Trading Style. for Example - 05 Min
Step #3 - Wait for Trading Signal either Buy or Sell as per your Trading Strategy.
Step #4 - Once we get Trading Signal. Press "F9" or select "New Order" from Main Menu "Tools > New Order". You can also do this by clicking right-click on the selected chart. you will see the following screen.
Symbol - Means Currency in which, you wish to place Trade, here "EURUSD" is selected.
Volume - Lot Size of Selected Currency, here "1.00" standard lot size.
[Warning:- Don't place 1.00 lot size trade below the Equity Balance $1000]
Stop Loss - Price level for Placing Stoploss value.
Take Profit - Price level for Exit From Trade with Profit Booking.
Comment - this is Optional, You can put any comment as per your requirement. This is widely used for Algorithmic Trading for filtering Trades as per comment.
Type - There are 02 types of Forex Orders
- Market Order - Buy or Sell at Current Market price. here we have used this.
- Pending Order - Pending Order, executes only for Buying or Selling if certain price level-triggered as per the Trade defined (Professional Traders mostly use this).
Now, You can press either "Sell by Market" or "Buy by Market" as per the respective requirement of Selling and Buying.
Note:- You must use Stop Loss if you want to become a successful trader.
if you want to close the placed order before stop-loss or take profit level, you can close the order with the order list shown below the software by right-clicking on the selected order.
How to Get Profit from Forex Trading?
"Profit" is the magic word in the Trading Industry. all the traders want Profit" in their account.
As we know if someone gets profit another one gets loss in real life and the total traded money is constant.
So, trading is the skills of reading the psychologies of other traders. which can be done by chart reading. Yes, some NEWS and important events also affect the Forex Market. But the limited the time effect.
You should try to learn the Trading Strategy from other Successful Traders. As I have listened to the Interviews of Experience Stock and Forex Traders and Reading them. I can suggest to you the following key rules expressed by Experience Traders.
- There is No Trading Strategy that can 100% Guaranty for profit-booking. It could be 70% or 90% etc. But Not 100%.
- Experience Traders only Trades with 01 or 02 Currency Pairs as well as Some Precious Metals like XAUUSD and Top Indexes. They do not try to go here and there. Because they believe, if they stuck together with the Same Currency Pair for a long time. they can easily read the reason for the Up and Down Movement of Currency and book some good profits from these moves.
- Experience Traders only Trades with Currency Pairs or Commodities with High Volatility.
- Experience Traders also tries to minimize the "Spread" by choosing the correct Forex Account Type. because It is one-time practice and you can feel the difference in the profit figures.
- Experience Traders only Trades with 01 or 02 Trading Strategies. they don't change the trading strategies frequently if the current strategy is profitable. They only do experiments with Demo Accounts for testing New Trading strategies.
- Experience Traders choose the Optimal Lot Size as per the Equity Balance and Risk Percentage.
- Experience Traders always put stop loss levels in the system. They do not feed the Stop Loss in Mind. Putting the Stop Loss in System helps you in the reduction of depression because you know how much money you could lose in this Trade.
- Experience Traders use Trailing Stop Loss levels for Booking Profits. They constantly shift the Stoploss in the positive direction of Trades. whereas new traders shift the Stop Loss in the negative direction of Trade.
- Experience Traders always try to protect their capital first. Profit-making is always the second priority.
- Experience Traders plots the critical levels on the chart.
- Most of the Experience Traders do not trade in a sideways market. (there are some exceptional trading strategies for example - Bollinger Bands 5 min Scalping with 1, 2, 4 deviations)
- Experienced Trades withdrawal their profits on a regular basis.
- Highly Experience Traders does not Trade on "Technical Indicators". They only Trade by observing Price levels. because "Technical Indicator" is derived from History Price.
⭐ Is Forex Trading Legal in India?
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💎 How to set up Stop Loss in Forex Trading?
💍 How to set up Take Profit (TP) in Forex Trading?
🎭 Profit in Demo Account But Loss in Real Forex Account
👓 Can I Become a Successful Forex Trader?
🤑 [Truth] Forex Trading is Pure Gambling
🤔 Is Spread plays a major role in net profit booking in Forex Trading?
🚩 Roadmap for start trading in Forex#Forex #Trading #Fundamental #Best #Knowledge #KHOPADI #latest
Summary
Forex Market is the most volatile market in the world. You can earn easily from Forex Market once you learn the basics of Forex Market and Start Practice in Demo Forex Account with your Favorite Trading Strategy. You can do Forex Trading with MetaTrader Software or App easily. You should focus on building your own Trading Styles and obey the rules expressed by Experience Traders.