FOREX Trading for BEGINNERS - How Does Forex Trading Work - Forex Explained UK 2020

NEW TO FOREX? In this Forex TUTORIAL for BEGINNERS, I explain how Forex trading works and show you how to trade Forex. Trading Forex is very easy to learn, however, making money from Forex is much trickier.

I have been trading Forex for a number of years and have tried various Forex strategies including scalping, day trading, trend trading - not forgetting a Forex strategy that was part of a paid course that lost me over £500.

I remember when I was new to Forex, there were so many terms to take in and all of the videos I watched were more focused on selling a Forex course than explaining what Forex is.

In this video, I try to explain all of the common Forex terms that used to confuse me when I first started trading Forex. If you are a Forex beginner then hopefully this Forex tutorial will help you understand how Forex trading works.

There are 180 currencies in the world and many of these are available to trade as currency pairs in the Forex market. There are the 8 major pairs and the other pairs are called either minor or exotic Forex pairs - being based in the UK my favourite Forex pair to trade is GBP/USD (aka Cable).

With currency pairs, the first currency is called the “Base” currency (with the GBP/USD pair GBP is the base currency) and the second is the “Counter/Quote” currency (with the GBP/USD pair USD is the counter currency).

Currency pairs have two prices, Bid and Ask:

• Bid = Buy Price
• Ask = Sell Price

The spread is the difference in Pips between the Bid and Ask price - spreads are typically smaller in high liquidity markets and when there is less volatility.

PIPs (Percentage in Point) are a unit of measurements that shows the price movement of a currency pair - usually the second to last decimal.

Most Forex traders will use leverage when trying to make money with Forex. Leverage allows you to control larger amounts of money than what you actually invest and is often required as currency price movements are usually very small.

To use leverage the broker will require that you make a deposit called a margin. The margin is the amount of money deposited to a broker to allow you to trade. When using leverage it is possible you will receive a margin call. This is when the amount of money in your account is less than the potential loss of open trades (these positions will automatically be closed). Many brokers offer negative balance protection to protect you from losing more than your deposit if markets go against you.

There are generally 3 areas that Traders will look at when considering a trade - technicals, fundamentals and market sentiment.

• Technical traders rely on the analysis of charts and graphs to spot patterns that may give a buy or sell signal e.g. candlesticks, support and resistance levels and various indicators such as MACD / RSI.
• Fundamental traders look at the political, social and economic data that could impact the value of a currency e.g. GDP and interest rates are two key pieces of data that help assess the economic well being of a country.
• Sentiment traders look at market as a whole and at what other traders are doing to get a feel for where the market is going, they may take into account the volume and position of other trades to get a sentiment for which direction the currency pair is heading.

Forex traders can focus on one area or a combination of these factors.

In a Forex market you will often hear talk of Bulls & Bears and Long & Short...

• In a Bull market investors buy low and sell high, if you believe the price of a currency pair is going to go up then you are seen as being Bullish
• In a Bear market investors buy high and sell low, if you believe the price of a currency pair is going to go down then you are seen as being Bearish

• If you take a long position (buy base currency / sell counter currency) then you want to see the price go up
• If you take a short position (sell base currency / buy counter currency) then you want to see the price go down

Forex brokers allow you to speculate on foreign exchange price movements in the Interbank market, there are two types of Forex brokers:

• Dealing Desks (DD) - the trade is filled against other traders using the same broker or the broker themselves will take the other side of the trade.
• No Dealing Desks (NDD) - the trade is passed through to the Interbank market

You need a broker and a trading platform to be able to trade currencies. Brokers usually promote their own trading platforms, however, they also often support the use of third party applications such as MetaTrader.

In this video I am using the MetaTrader 4 trading platform with IG as the broker - this is a great of trying Forex for free with a demo account:
https://www.ig.com/uk/trading-platforms/metatrader-4/mt4-demo-account

If you have any questions about Forex trading, please let me know in the comments and I'll reply to everyone!

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