How To Trade Forex?

Learn to trade forex

Steps for learning trillion dollar trade

Forex is perhaps the world’s largest stock exchange market and most of the transactions operated are against U.S. dollars. New York Stock Exchange is the biggest contributor in this ever growing foreign exchange business, which has astonishingly reached its astronomical heights of three trillion dollars per day. Though in 1972 the doors of Forex was opened for general masses also which now contribute to 4% of the entire foreign exchange trade, few people have the technical knowledge of how the entire process is executed online or offline.

For conning the process involved in this dynamic trillion dollar trade one need to follow the brief steps listed below.

Step 1) Know all about pips,

Q) What is a pip?

A) Smallest increment in the currency is called pip. OR It is the last decimal place of a quotation OR It is a constant for converting everything to offer currency

Q) Formula for pip?

A) FORMULA FOR DERIVING PIP

(BID currency unit / EXCHANGE RATE) X budget= 1 PIP VALUE for bid currency

Step2) Q) Know, what is an exchange rate?

A) Exchange rate is rate at which the two currencies are exchanged with each other on the forex market.

Step 3) Q) Know, What Forex quote denotes?

A) Forex quote denotes two fields bid and offer, for instance EUR/USD. A more naturalistic figure will be 0.9055/0.9095 means traders are willing to buy 0.9055 euros for 1 USD and will to sell 0.9095 euros for 1 USD

Step 4) Begin your trade, select your currency and budget, though standard slots for trading is $100,000 a micro slot of $10,000 have been recently introduced.

Let us start with a hypothetical instance of most adored currency pair and at the lowest budget,

EUR/USD, $10,000 as budget for investment and Exchange rate of 0.9887

Pip value for Euro = (0.0001/0.9987) X 10000=Euro 10.11 /pip

Pip value for dollar=Euro 10.11 X 0.9887=$10 /pip

Step 5) At the end of the session, when you feel that the time has come when you can capitalize on your profits you can end the trade. A simple instance is provided of how exactly it is executed,

We again take the hypothetical example of EUR/USD, you decide to sell the euro and are quoted 0.9885 / 0.9890, and you will be taking the buyer quote which is 0.9885. In due course of time the index jolts and a new quote is served 0.9805/0.9810. This time you take the sellers quote for opening the trade you sold euros, but to close it you must buy back the currency you used to initiate the trade in the market, here your closing quote selected will be 0.9810. The difference between the two quotes which are (opening trade) 0.9885 and 0.9810 (closing trade) is 0.0075 which will be 75 pips

Calculating the pip rate for offer currency, (0.0001/0.9810) X 100,000 =Euro 10.19: EUR 10.19 X exchange rate 0.9810= $9.99

Hence, Profit=75 X $10 =$ 750.

The steps cited above promulgate a vivid view of the foreign exchange market. Although there are several other options like resorting to leverage, which is another form of futures and options of the stock exchange, but my best advice for the novices is to turn their heads and resort to a more simple trading sessions. Leverage is the facility for past masters who know their vibes and are quick enough to strike a goldmine at the most prudent hour and place.

back to Forex