Forex Trading Basics 1.0

Forex trading has been one Major talk of the century, in which I believe every one in the 21st century should key in, I posted about Learning forex trading last week which would be treated on a whatsapp platform, but I decided to bring this class on Read.cash so it would benefit a lot of people who would love to learn forex Trading.

The forex trading class will hold for 3 days, in which major parts of Forex will be treated and understood if followed well.

Below is the outline for Day one's class..

STAGE 1 "DAY ONE"

❇INTRODUCTION

❇WHAT IS FOREX

❇WHAT IS TRADED ON FOREX

❇WHO IS A FOREX BROOKER

❇TRADING TIMES & TRADING SESSIONS

❇TERMINOLOGIES USED IN FOREX.

❇FORMS OF TRADING

❇CURRENCY PAIRS.

❇MT4 INTERFACE PART 1

Let's begin

What is FOREX?

FOREX stands for Foreign Exchange which is the largest financial market in the world with about a volume of $5.3 Trillion traded per day unlike the New York Stock Exchange (NYSE) with a volume of about $22.4 Billion traded per day.

What is traded on the FOREX market?

The answer is simply MONEY!!!

Though unlike the normal market which is traded physically, the Forex market is traded electronically. The price of a currency is usually a direct reflection of its value. Once you buy a currency, you are betting that the currency will gain some value or appreciate, and once you sell a currency, you are as well betting that the currency will lose value or depreciate.

Currency Pairs

Currencies are traded in pairs and are denoted using symbols which often have three letters, where the first two letters identify the name of the country and the third letter identifies the name of that country’s currency e.g.

Take GBP for instance; ‘GB’ stands for Great Britain while ‘P’ stands for Pounds.

Take USD for instance; ‘US’ stands for United State while ‘D’ stands for Dollar.

Take NGN for instance; ‘NG’ stands for Nigeria while ‘N’ stands for Naira.

This are my currency pairs

Don't get worried if you are using a phone, You have the same access to the same market.

Because you’re not buying anything physical, forex trading can be confusing so we’ll use a simple (but imperfect) analogy to help explain.

Think of buying a currency as buying a share in a particular country, kinda like buying shares in a company.

The price of the currency is usually a direct reflection of the market’s opinion on the current and future health of its respective economy.

In forex trading, when you buy, say, the Japanese yen, you are basically buying a “share” in the Japanese economy.

Advantages of Trading the Forex Markets

24 - Hour Market: The forex market is always open 24 – Hours. Most brokers are open from Sunday at 10:00 PM GMT +1 (Lagos) until Friday at 10:00 PM GMT +1 (Lagos) with customer care services usually available 24/7.

No Commission: No government fees, No brokerage fees. Most retail brokers are compensated for their services through something called the “bid-ask spread”.

No Fixed Earnings: There is no limit as to how much you can make in the market per day due to the amount of volume traded per day.

No Intermediate: Spot currency trading eliminates the middlemen and allows you to trade directly with the market responsible for the pricing on a particular currency pair.

Low Transaction Cost: The cost of transactions under the normal market condition is always equal to or less than 0.1%.

Manipulation: The Forex Market is so huge that no single participant can control the market for an extended period of time (not even the Central Bank of Nigeria or America)

What is a Forex Broker?

If you want to trade in the forex markets, you need a broker. But what exactly is a broker? To understand this, consider the following:

Let’s say you want to buy an apple, so you go to a street market. The apple is what you want to buy – the street market is the place where you can do this, because that is where people are selling apples.

Similarly, imagine you are now selling apples and need to find customers; you can go to the street market because that is where your customers are – that is where there are people buying apples.

The street market is a place where buyers and sellers meet. However, when you go to a street market, you do not generally see many people selling apples to each other; they will be sold through a stall.

In the forex markets, this is no different. You have buyers and sellers of different currencies – they need a place to come together and there needs to be a facility to actually buy and sell those currencies.

In the forex markets, however, the buyers and sellers can be thousands of miles apart. In order to find each other, there must be a mechanism that matches their interests: this is where the broker comes in.

WHO IS A FOREX BROOKER

Forex Brokers are Firms that gives you access to the FOREX MARKET.

They provide you as Trader access to the Financial market..

By providing a Trading account for you.

They give Traders what we call Leverage. (we would see that soon)

They also provide Support Functions to the traders.

There are various Brokers in the Forex Market

SuperForex

Hotforex

Fxcm

FBS

LiteForex

Forex Market Participants

Forex was originally intended to be used by bankers and large institutions and not by retail traders like us but overtime, the internet has made things easier with online brokers which offer accounts to retail traders to have access to the markets. Forex market participants majorly include the Banks, Large Commercial Companies, Governments (Central Banks) etc.

Forex Trading Sessions

There are Various Trading Times and Trading Sessions in Forex 
They include
SYDNEY SESSION
TOKYO SESSION
LONDON SESSION
FRANKFURT SESSION
NEW YORK SESSION

The Sessions names are derived from the major cities in which most of the Transactions are done.

The Forex Market is open 24 hours a day but it is not always volatile all through the day. The market is often quiet during the Asian session and active during the London and New York and within these two active sessions, both markets elapse for about 4 hours which means more volatility, so, therefore, that is often the best time to trade the forex market.

For example

Sydney Session represents Australia and other countries around that Time zone

Tokyo session, sometimes called ASIAN Session represents Japan and some of the Asian countries.

London Session represents The United Kingdom and the countries within it.

FRANKFURT session which is in Germany represents Europe.

While

NewYork Session represents The Americas.

Forex is actually a 24 hours market.

It is most times regarded as the Market that never Sleeps because it's open for 24 hours of the day except on Weekends. So no matter where you are around the World, no matter your Time zone... U can actually Trade this Large, Highly Liquid market.

Let's now get to their Trading Times....

Because each of this Session have their own Opening and Close times...

SYDNEY SESSION Opens by 9PM GMT

TOKYO SESSION OPENS BY 11 PM GMT

LONDON SESSION OPENS BY 7AM GMT

FRANKFURT SESSION OPENS BY 8AM GMT

NEW YORK SESSION OPENS BY 1PM GMT

Let's note these Times down in our Exercise as U all would be needing them for your Trading.

Also, Note that these times are listed in GMT

Greenwich Meridian Time

you should do the appropriate Calculation depending on your countries Time zone, so as to know which session, you are currently on.

Example

Sydney Session that Opens by 9 PM GMT

WOULD close by 6AM GMT

also, TOKYO Session that Opened by 11PM GMT

WOULD close by 8AM GMT

NEWYORK SESSION that Opened by 1 PM GMT

WOULD CLOSE BY 10PM GMT

AND SO ON FOR OTHERS..

just add 9 hours to their Opening Times

Now there is an important thing to note here...

This is what many Forex Traders don't actually understand because nobody taught them.

It is always good to Trade the Market when 2 Markets are open at the same time.

When 2 of the sessions are open

Please Take note of this Important point

This is Because Volatility is always more when 2 or more Sessions are Open.

And in Forex Market, More Volatility means More money.

As a Forex Trader, U wouldn't want to trade a Quiet market, because there won't be many Fluctuations and it's those movements that make money for us.

U would come to understand these soon and know what I mean.

Example by 12 AM GMT

Sydney Session and Tokyo Session would be open together and it would have more Volatility than someone that is Trading at 9PM GMT because the market would be Quiet.

Another Example is by 8AM GMT

London Session and Frankfurt Session would be open, in fact, even Tokyo would be with them briefly, so you would notice that Volatility would increase during such times.

So as a Forex Trader, Always time your Trading to fall in periods where 2 or more Markets are open at the same time.

By doing that U would always have an edge in the market.

We would be learning more important things, let's just follow the Trading closely

Some of You have heard about Forex before I'm aware, though U may not have known how to Trade the Market.

Don't freak out!

Just as you have patiently read through, you can always patiently make more money in Forex.

TERMINOLOGIES USED IN FOREX

Just Like every Field, you try to learn, U would have to get accustomed to its Terms and Terminologies

So also is the Field of Forex, U would need to learn about the Terminologies so as to be able to communicate with the Market, Analysts, and also with your fellow Traders.

U may be among the gathering of Forex Traders but U won't understand a dime of what they are saying, this is because U don't know the terms.

So that is what we would be learning in this section So as I was saying

For every New field, you embark upon in Life, U would encounter New Terminologies and terms which is peculiar to such field.

Be it Law, Medicine, Journalism, Engineering, etc

And you would have to get yourself acquainted with their Terminologies so as to be able to communicate properly.

i. Long/Short

To simply put it, long and short refers to your trade direction.

If a trader says something like, "Hey Rayner, I'm long EUR/USD!"

This means that the trader would make a profit if the price goes up.

It means the trader is bullish.

He wants the market to go up so he can make a profit.

And if someone says, "Hey Rayner, I'm short the GBP/USD!"

This means that he wants the market to go down because he will make a profit if the price trades lower.

So, this is the meaning of long and short.

Long means you're bullish.

Short means you're bearish.

You’ll make money if the market goes down for short.

And you'll make money if the market goes up if you're long.

ii. Bid & Ask

What is a bid and ask?

This can be a little tricky because it depends on what market you're trading.

If you're trading the futures market, the bid and ask price means different compared to someone who is trading the Forex market. Since we are dealing with Forex, I'll just explain it in-terms of the FX market.

The bid is basically the price that you can sell it.

The ask is the price that you can buy at.

One thing to know is that when you are trading Forex, there isn't exactly one price in the market.

It's always two prices; the bid and ask.

Let’s say you're getting EUR/USD.

Let's say…

The ask is at 1.0015

The bid is at 1.0014

If you want to sell EUR/USD right now, you will sell it at the Bid price.

If you want to buy EUR/USD right now, you'll buy it the Ask price.

Depending on your trade direction, you are being offered different prices when you're trading.

One thing to note is that the bid is always lower than the ask.

iii. Bullish / Bearish

Market sentiment gives a view of the performance of a particular market or the stock market overall.

When Market sentiment is Bullish, this means the price is going up.

When Market sentiment is Bearish, this means the price is going down.

An easy way to distinguish the difference is that bulls have horns and toss things in the air when provoked. Prices rising.

When bears are provoked, they get on their hind legs and tear things down. Prices decreasing.

iv. RANGING

A Market is said to be Ranging, if it does not have any particular direction.

It's neither moving Upwards nor Downwards

Also you may hear people tell you that the Market is just Ranging.

They are indirectly telling you that the the market has not found any direction yet..

v. TRENDING

A Market that has a direction. It's either moving Upwards or downwards, So you can hear people say a market is Trending upwards or the market is Trending downwards, Normally every market has a trend.

It’s either it’s trending upwards or downwards

When it’s goin sideways then it’s called ranging

vi. Lot Size

A Lot in Forex trading is the size of trade/position that you will open.

1 Lot in standard Forex trading on a currency pair is the equivalent of 100,000 units of the base currency of the pair.

If we look at EUR / USD, this means that opening a trade in USD would mean the trade size is $100,000.

EUR being the base currency.

1 standard PIP is worth $10

This means a 10 PIP incremental movement in a buy trade, this would represent a $100 gain.

vii. Leverage

Leverage is, in essence, borrowed money from within a trading account. Trading with leverage allows a trader to open a position with a high contract size with less expenditure.

High leveraged trading is an effective way to trade your favorite Forex pairs, cryptocurrencies and much more without investing vast amounts of capital.

Let’s use a popular Forex pair as a case study and use GBP/USD

Based on a contract size of 100,000 per lot a trader without using leverage would need around $130,000.00.

130,000 / 500 = $260

Using 1:500 leverage, a trader can open a position with just $260.00.

The trader is now controlling $130,000 with just $260

The next terminology that we would be looking at is

* HAWKISH

This term is mostly used when referring to the Central Bank Governor or personell of a Country.

When they are Hawkish, they tend to be liberal on interest rate and are willing to increase it.

This is good news for investors

* DOVISH

This is the opposite of Hawkish.

Financial personnel who are Dovish are very restrictive... They do not want to tamper with the interest rate.

They even want to reduce it.

This is bad news for investors.

Like what is happening to Great Britain right now.

* NFP

An acronym for NON FARM PAYROLL.

A very important News Event in the US.

Also Most of the Currency pairs have specific names in which they are called....

Let's see it Eg

The dollar is sometimes called Greenback

The Pounds is called the cable

The New Zealand dollars is called the Kiwi

The Australian dollars is the Aussie E.t.c

We would get to know them as we go along with the Training.

It's just to get you acquainted with the most popular ones so that When you see fellow Forex Traders discussing, U would tag along easily

As we go on with the Training, We would get to see more Terminologies and Explain them as we see them

Also When we start making use of the MT4 app ,always read the news there to observe that FOREX somehow has its own language every important

Forex Market Analysis

There are two basic types of forex market analysis which are;

• Technical Analysis

• Fundamental Analysis

Technical Analysis

This is a market analysis made from reading price action, referring to the past market data in order to predict future price movement. Technical analyst believe in the philosophy that says “history repeats itself”.

Fundamental Analysis

This is a market analysis made from an economic, social, and political point of view about a currency, e.g. Interest rate, Unemployment rate etc.

And they either positively Or negatively affect the Currency pair involved and then you make your Trading decision based on the news you heard,

Like the news of coronavirus affecting some currencies negatively serious,

Its an opportunity for a Forex trader to make money

We see all these News on CNN, Bloomberg, BBC CBC etc

Also Your MT4 App has a Summary of News Section

Also some sites like forexfactory, dailyfx etc

Gives you summary of this News.

We would come to see them later

I will also gave u an app too ,you can make use of the app also (the apps are FXHours and Investing)

Note them down👆👆👆

Now whether the News is Positive or Negative

As a Forex trader, that is none of your business because u make money both ways.

Those into Crypto Trading would tell you that you only make money when a Coin is appreciating.

But in Forex, we make Money Both ways. ✌🏻

If a Currency pair is appreciating, We go long on the pair

When a Currency is also depreciating based on the News, We go short on the pair.

Today We would be discussing an Important News Released by the United States.

Even though there are News release everyday. There is what we Forex Traders Call KING OF ALL NEWS Also called It's called the *NFP*

*NON FARM PAYROLL*

This is a News released by the United States of America.

Among all the news released by the US, this is the highest because it causes the most Volatility in the market.

By Volatility, we mean making the market fluctuate and move in a particular direction most rapidly.

In forex we calculate Profit in pips ( we would talk about pips soon)

On a day of NFP, you don't even need to Trade much to make your daily pips

Just one Currency pair could make a move of 80 pips within 5 minutes. We would all see this soon, The News Is Released every First Friday of every month.

No FOREX TRADER dreams of missing that, because that is where the most profit is made.

It's better seen on your Charts than told.

The Volatility could be so massive🔥🔥 that Poeple Close trading for the day within 30 minutes.

The News comes by 12:30 PM GMT

Every First Friday of every month.

Save that date on your Calendar.

NB: The Next NFP is coming up on 7th of August 2020.

We would all Trade it together here so that you would see and understand what I mean, because like I said earlier it's better one Trades it and sees it than me explaining it here.

I believe by next NFP we must have gone far with the Lectures so let's start getting ready.

No Forex Trader fixes his Wedding or Party on the First Friday of any month except it's a Night event.

So as Forex Traders, Never miss it.

If you are driving and it's 12:30 PM GMT+1

Just park, Open your Phone Trade your NFP and continue where you are going

If you are sick (God forbid), just tell them to give you your Phone that Friday, because you can't miss NFP. That's how Big it is.

If you are attentive when you go to Night Clubs or you have friends who Trade forex , you must have heard people talking about the Next NFP coming up.

Though because you are not into Forex Trading , you may not understand what they are saying. Everybody is just getting ready.

Hope we all read and study well so to understand the basics of forex before the next class.

Stay tuned for yet another class on forex Trading basics 2.0