Forex Trading In A Nutshell

Thousands of people everyday trade Forex (foreign exchange) also known as currency trading. Trading currencies means that you are speculating on whether a country’s currency will move up or down versus another country.

The platforms and tools are similar to stock trading however instead of buying or shorting a stock, you are buying or shorting a currency pair.

The most popular currency pair traded is the EUR/USD which represents the Euro versus the US dollar. For example if right now the level is 1.3500, this means that it costs one dollar and 35 cents (US$) to buy a Euro. There are 4 decimal places, this is because the brokers allow you to speculate on intervals of 1/100th of a cent. These intervals are commonly known as “pips” and so between 1.3500 and 1.3600 there are 100 pips.

You are speculating on if you think the currency pair will go up or down and you risk a fixed amount per pips for each bet. For example you can bet 1$ per pip with a 50 pip stop-loss, this means you are risking 50$ if you lose the trade. You can go for as many or as few pips as you like.

Most beginners assume that learning to day trade forex must be very easy as there are only 2 directions the pair can go. The reality is very different and statistics indicate that close to 95% or retail (amateur) forex traders will lose and give up within 2 years.

One of the big problems for most traders is money management. If you start risking 5% for example, a few bad trades will really hurt your account and before long you may need to double your money just to get back where you started.

Forex trading is a business and not a “get rich quick scheme”. Just like any business it requires a lot of hard work, perserverance and resources to succeed and make it through the challenging Many successful traders report that it took them 2 – 5 years to beome consistently profitable. Getting the right educcation can make all the difference.