Section 1

What Is Forex And How Does It Work ?

Forex short for Foreign Exchange is an international currency exchange market which is the most actively traded in the world with more than 5 trillion $ in transactions made on an average day in comparison the volume exceeds all global trading volumes by x25. This is conducted by determining the price of one countries currency to another. For example, How many euros you get for a dollar. This allows people to buy or sell the base currency against the quote currency. E.g (GBP/USD).

The fundamentals behind the currencies economy is essentially what causes prices of the base currency to go up or down, This stems from a variety of topics from politics to unemployment levels with news releases plus much more that we will indulge into further on. Trading the Forex Market is mainly done in two ways, Either day trading or swing trading.

- Day Trader: Opening and closing multiple positions in the same day

- Swing Trader: Holding a position or multiple for a period of a few days to even weeks/months.

Whilst both have different approaches and methods of trading they are still equally just as profitable, It mainly is based on How you are, Your emotions, Strategy ect. The market is extremely volatile, dynamic and liquid being affected by news, events, banks plus much more that fluctuate the prices rapidly providing multiple market entries for speculative traders like us.

Forex is always quoted in pairs,  (Bid/Ask) price. This is the current price of each currency pair, and usually separated by the spread difference which can be various depending on your broker. If you have traded before or even tried a paper account you will notice that each time you open a trade no matter the lot size it will start out in negative, The reason being is the spread number given to use by the brokers which can change and fluctuate anytime throughout the day with more volatile times as well. (How many micro pips you lose in favour upon entry (Spread: 24= 24 micro pips =2.4pips).

-The Ask price is where we enter when we buy a base currency.

-The Bid price is where we enter when we sell a base currency.

If you sold a currency pair then you would enter at the bid price 2.4 pips below the ask price. The smaller the spread the more beneficial for the trader as this means that you can actually enter closer the price, entering profit quicker and hitting your stop loss slower, They can widen due to lack of liquidity or sudden global effecting news.

So you have the bid/ask price covered, When you see the Forex pairs you will see they are displayed like this: EURUSD: 1.07460 which means that 1 Euro equals 1.07460 US Dollar, If the number increases that means that Euro is getting stronger compared to the US Dollar and same with if it decreases then the US Dollar is gaining strength over the Euro. The number on the left is the low number and on the right you have the high number which is just the difference of the spread this is how many pips behind it will be and how long it will take for you to enter profit.

EUR / USD

EUR = Base Currency

USD = Quote Currency

Selling Price = 1.07460

Buying Price = 1.07465   

How it works:

-You choose a reputable broker (which we have a section on)

-Create your account with the chosen broker

-Deposit your funds & choose your leverage

-Download your chosen trading platform & log in using the brokers trading account

-Begin trading

Advantages:

- Work from anywhere with internet

- Make money even when there is volatility in employment and economics

-You can start with a small amount unlike the stock market where you need upwards of 10-50k. We have seen people build their portfolios up from as little as £100-1k and generate a full time income for themselves, that being said it is very difficult.

-Withdraw your profit whenever you want, Different brokers set different terms for there withdrawals however most often you can process it instantly and receive it from 1-7 working days later providing a very convenient and effective way to obtain your money.

- You can trade more than just Forex currencies, You have the options to trade Indices, Crypto, Metals, Energy, Equities plus much more, Again depending on your broker and what they provide.

Disadvantages:

- Over 90% of the people who attempt to invest in the Foreign Exchange Market overall lose their money. It's easy to get lucky and make a quick buck however to consistently profit, build your portfolio and have enough funds to withdraw each month as an income for the longevity is a different matter.

- The stress involved in Trading is unheard of! Emotions & Psychology play a big part in Forex. Some people crack under the pressure.

- Depending on your approach it can be high risk with the potential to lose your account balance. If you don't understand the markets or events that take place quite often you can be at risk of total account wipeout!   Always use your risk management!

These are some of the Major & Minor currency pairs available which are most often traded on a day to day basis because they provide smaller spreads, lower margin requirements and just better trading conditions overall then the Minors are the less traded pairs but still profitable and volatile.

Major:                                                       Minor:

- GBP/USD                                             - GBP/CAD

- EUR/USD                                            - NZD/JPY

- USD/JPY                                             - EUR/AUD

- USD/CHF                                            - EUR/GBP

- AUD/USD                                           - NZD/CAD

-USD/CAD                                           - EUR/JPY

-GBP/JPY

There is many more pairs & currencies including Exotics which are just low in liquid with wide spreads and rarely traded, I would actually include a pair called XAU/USD on the Major list for me which is GOLD/US Dollar as not only is it a very popular pair but is great for day traders due to the volatility and profits however as currently we are focused on the Forex pairs I will leave the Gold discussions and information until later on in the course.

All in all if you are in it for the long run and prepared to put the time in and learn how to trade yourself confidently using the correct risk management you will do much better then if you over leverage, be greedy or just bet the house. Don't bet the house haha! Think of it as a marathon not a sprint but as instead of just getting paid at the finish line like a interest investment or future ect we want to be generating a full time income on the go, Letting your accounts build up to a nice fundamental status so that you can set yourself a weekly/monthly withdrawal % to provide you a second or primary income meanwhile your portfolio will still be increasing and the more it increases the more your payouts increase due to the profits being bigger as you’ll gradually be using bigger and bigger trades which we will also discuss further on.

We just wanted to touch up on what Forex actually is, How it works and just provide a brief fundamental understanding now we will continue onto the next stage and much of this will be dug into more in detail further on in the course but we can understand it can be a lot to take in and process so we do highly recommend taking the occasional break whether it be 5 minutes or 1 day, Refresh the mindset and come back eager to learn more.