- July 24, 2020
- Posted by: Brenda Knight
- Category: Consulting
Forex for beginners is a simplistic guide made here at Pipodrome that’s focusing on helping new clients learn the art of trade. Keep with us and if you have any questions or uncertainties regarding this guide contact us and we can talk about it and make everything clearer.
At a time when there are many ways to make a profit like well-known stock exchanges, services, online financial markets, Forex is a story for everyone, for you either. Of course, online platforms have long been popular and form an integral part of the global financial market. In the cyber era, there are many platforms and online markets for making money.
What is Forex?
Forex is, in fact, the largest online market. It is an abbreviation of Foreign Exchange and represents one of the safest ways to make money. According to its concept, it is a unique financial market, with the highest earning potential. It works on the principle of exchanging one currency for another. By the amount of money circulating through this business system, Forex convincingly surpasses all others. Also, the amount of money one can earn in this system exceeds all other financial markets.
What makes it more successful than other markets?
The reason lies in the trend that was developed in Forex. There is no centralized stock exchange, such as in well-known stock exchange transactions of goods and shares. Currencies are exchanged through a global network of banks, brokers, and dealers at any time, regardless of whether, for example, the stock exchange in New York is open or not. You can feel free to trade in Forex whenever you want because this system has liquidity like no other in the world. A decentralized currency exchange system makes Forex the unique and largest real financial market in the world. In this system, both individuals and companies can exchange currencies in the interbank market.
Can anyone use Forex?
This system used to be a place for billionaires, a kind of exclusive club. Today, everyone can participate. Everyone, individuals, and companies can exchange one currency for another. The fact that this market used to be available only to millionaires, and now to all of you, gives a motive for learning and progress. And the most important, for profit.
How does forex work? Will this forex for beginners guide explain it?
We’ve made this Forex for beginners’ guide to explaining just that. The system consists of investing money in currency conversion. Also, you have to put time and effort in predicting changes in the exchange rate. But this is not a big deal. You will need time and effort at any job, and here you will be able to decide for yourself and earn well, the way you want. The system itself provides the opportunity to progress and gain the feeling of a trader. You can develop a sense to be sure in advance that you are right about any exchange. Also, the system has regulations, open, liberal but has a reputation for fair play. So, all the prerequisites are there for good earnings and developing a sense of merchant. This is a great opportunity to educate yourself and get detailed information on price movements of pairs, changes in the market, and earning opportunities.
Let’s get deeper into the system and how it operates
Since it is a coin exchange, Forex prices are in currency pairs. In other words, prices are concerning one coin to another with which that currency is in pairs. It means that when you trade, you sell one currency and buy another with which the first coin is in pairs.
What’s the most common pair in Forex?
The most common pair, although not necessarily the rule, is EUR / USD. On the left side is the base coin, in our case EUR, and on the right is the counter currency, the US dollar. The price of a pair is the ratio of the base currency, its value to the value of its counter. For example, if there is 1.3651 next to EUR / USD, this means that for one Euro (base coin), you can get 1.3651 US dollars (counter coin). It also means that the Euro is stronger for that ratio against the USD it is worth so much more than the dollar. It is a difference in price when buying or selling one currency to another. This difference in price is called the spread. It is on that purchase and sale price that earnings are made.
When should you invest?
If the trader anticipates or has information that the base currency, in our case Euro, will strengthen against the counter, USD, then the trader buys that coin pair. Then the trader takes the so-called long position. If the prediction is that the base currency will go down, the trader will sell the pair, a position so-called short position. The value of pairs on the market depends on many factors. These are inflation, interest rates, interventions by the state bank, and which depends on government policy, GDP, unemployment rate, as well as foreign trade, import-export. However, the system itself provides the possibility of information and education so that you can easily monitor all the parameters that affect changes in pairs.
As in any other market, Forex is affected by the law of supply and demand. First of all, currencies weaken or strengthen due to changes in interest rates. The interest rate affects the strength of the money. With the changes in the interest rate, the size of investment changes, and thus the currency becomes stronger or weaker. Also, all other mentioned economic parameters in the country affect the strength of the currency. Besides the mentioned GDP and unemployment, an important role is a national bank with the intervention in the market to preserve the value of the domestic money. Finally, the behavior of traders themselves, their speculations can significantly change the course of the market. Remember that you are also involved in all of this, and with your actions, you can influence things to turn in your favor. It is an advantage of this system that no one else has.
How much do I need to invest to start trading on the Forex market?
The investments themselves do not have to be large to start trading Forex. While it used to be a club of billionaires, the initial investments were at the level of millions of dollars. Today, the initial investment can be as much as $ 100. Trading has become available to everyone and allows a trader not to trade and still make a profit thanks to rollover. At the end of each cycle in Forex, they calculate the rollover for all still open positions. So even without a trade, thanks to a positive roller, you can make money. That is why it is good to check the value of the rollover for the pair you want to trade. If you make sure that the rollover for a certain pair is positive, which is very easy, you will make money without trading.
What are Lot and Pip?
Terms you need to know at the beginning are also Lot and Pip. A Lot is nothing but 100,000 units of a currency. This value dates back to the time of the millionaire club when investments were great, and 100,000 was the smallest amount invested. That is why micro and a mini Lot are in use today, inherent in the popularization and suitability of Forex for everyone. Now we move on to Pip. The price of a pair is a number that has four decimal places. Our example of the pair EUR / USD whose price is 1.3651 on the fourth decimal place has the number 1. That 0.0001 represents one Pip. It is, in fact, the smallest unit of the pair’s price. Since it is the smallest unit, it is also the slightest change in value for a currency pair. With the changes in Pip during the trade, you make a profit. What is a, for example, meter for length in a metric system, Pip is a unit of measure for changing the price of a pair. Most of the pairs’ prices have four decimals. However, Japanese yen pairs go to two decimal places.
How do I calculate the winnings and losses?
You may be wondering how changes of a pair’s value determine earnings. For example, if the mentioned pair EUR / USD had a value of 1.3651, so that price changed to 1.3652, which means that the USD moves higher for one Pip. Since Pip is the one that determines the amount of profit, the value of Pip should be determined. It depends on the pair being traded (EUR / USD), the amount of money invested, and the price of the pair. If the trade is €30,000, and after closing a gain of 30 Pips was realized at the rate of 1,3681, then the calculation of the profit will be determined as follows. (It should be emphasized here that the number of Pip obtained during the trade can be much higher. Here is just an example of how it works.)
- Determine the number of the counter currency, in this case, USD, which each Pip represents.
Multiply the amount of money invested by one Pip:
30, 000 x 0.0001 = 3 USD per pip.
- Then calculate the base currency (EUR) number per Pip. Divide the number of USD per Pip (3 USD per Pip) by the pair’s rate to find the number of EUR per Pip: 3 / 1.3681 = 2.19 EUR per Pip
- Calculate the profit you made. Multiply the number of Pips gained during trading by the value of each Pip expressed in EUR: 30 x 2.19 = 65.78 EUR. It was just an example of how the earnings system works, although you don’t have to calculate it, Forex does it for you.
Okay, and what’s a Leverage?
Of course, in our Beginners guide for forex, we plan to explain the leverage. If you are still unable to invest big money, you can always borrow. It is a Leverage option. This way can trade with the borrowed money with a small deposit. Then you become a player who plays with big traders and millionaires. With the realized profit, you can repay the debt. Of course, you have to anticipate movements in the financial market to make money. With this system of education, gaining experience and way of doing business, predictions about the course of financial flows will not be a problem, on the contrary. You will become a successful trader even though you never dreamed you could be one.
Learn from your mistakes
Once you have adopted all the basic terms necessary for financial business, you need to develop a mind of a trader. You will achieve this through market experience. This whole concept teaches you that occasional mistakes in predicting financial flows are an integral part of education, and you will never look at mistakes as something negative again. You will see that everything you do goes in your favor at the end of the day. You can be a part of this club. No worries, here you have the legal opportunity to earn money. Always review your mistakes, don’t give up, and look at losses as something that implies in the path of earning. Analyze your actions and you will learn how the financial market works.
Become a master of the matter. We hope our Forex for beginners guide will just be the first step to your success
Don’t forget that your act is the beginning of the road to earnings. Always try to react as best you can. You are also looking for feedback on your work because you do not see yourself while working. Should some pair be replaced by another, why did some of them did well while some didn’t? At what time does your trade idea work best? Think about it every day and make adjustments to your trading experience. Make your trading plan, look at various charts, ideas, and strategies with indicators of possible growth or decline in the price of the currency pair. But never blindly trust others. Sometimes their plan works well for them, which doesn’t mean it will work well for you.
You will notice that you do not have a boss here who issues tasks to you. You are your boss, moves are only yours and the result of your decisions. Take these chances to earn and have a comfortable life. Is there anything better than educating yourself on how to earn as much as you need? You can start by registering at pipodrome.com for free and enjoy some free pieces of advice as well as the trading tips, and afterward, we can talk about membership after you’ve established the basics.