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Forex

Academy

Get Familiar With the Terms and Strategies for Wise Trading

Forex trading

Foreign exchange (forex or FX) trading is the process of buying one currency and selling another to make a profit. Traders try to earn money by taking advantage of changes in exchange rates between different currency pairs, like the Euro against the US Dollar (EUR/USD) or the British Pound against the Japanese Yen (GBP/JPY). Because global trade and finance involve so many countries, forex is the largest and most liquid market in the world.

CFDs & Forex

Another way of looking at it is that forex is mostly driven by global events and However, all instruments will be affected by multiple factors and can also be impacted by unprecedented events. There is no fixed guide to trading, so we always recommend seeking independent advice and keeping a close eye on all your open trades.

CFD stands for ‘Contract for Difference’, and a CFD commits you and your broker to exchange the difference in the price of an underlying asset between the opening and closing of your CFD position. CFD futures trading allows you to use leverage to gain bigger exposure to the market while not directly owning the underlying asset.

CFDs are mostly impacted by the supply/demand of the performance of underlying instruments.

How to Earn

Earning through FOREX trading requires a good understanding of how currency markets work, along with disciplined strategies and smart risk management. Start by learning the basics, like how currency pairs work and how to analyze the market using both technical and fundamental approaches. Key factors that influence currency prices include economic news, political events, and changes in interest rates.

It's important to develop a clear trading plan. This plan should outline when to enter and exit trades, how much risk you're willing to take, and the size of your trades. Practice on demo accounts to build your skills without risking real money, and keep learning so you can adjust to changes in the market.

Success in FOREX trading often comes down to patience, consistency, and keeping your emotions in check to avoid impulsive decisions.

Terms to Know

Ask - The lowest price at which someone is willing to sell a currency.

Base Currency - The first or left-side currency listed in a currency pair.

Bid/Ask Spread - The difference between the buying (bid) and selling (ask) price of a currency pair.

Contract for Difference (CFD) - A derivative that lets traders speculate on price movements without owning the underlying asset.

Margin - The amount of money required to hold a leveraged position.

Pip - The smallest standard unit of price movement in a currency pair, typically the last decimal place.

Long - Buying a currency pair with the expectation it will increase in value.

Short - Selling a currency pair with the expectation it will decline in value.

Something nobody tells anybody……

An interesting aspect of world forex markets is that it has no central or physical marketplace. Instead, currency trading is done electronically Over The Counter (OTC) and transactions occur via computer networks that connect traders worldwide. Markets operate via a series of connected trading terminals and computer networks and participants include institutions, investment banks, commercial banks, and retail investors worldwide.

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  • Tested Strategies

  • Tools to Use

  • 1

    Trend Following Strategy

    Trend following is a strategy that involves identifying the direction of the market’s momentum and trading in that direction. Traders use tools like moving averages, trendlines, and the Average Directional Index (ADX) to confirm trends. By entering trades when the trend is confirmed and holding the position until the trend shows signs of reversal, this strategy seeks to profit from sustained market movements. It’s particularly effective in markets that exhibit clear directional trends.

  • 2

    Range Trading Strategy

    Range trading is a strategy used when the market lacks a clear trend and instead oscillates between established support and resistance levels. Traders buy near the support and sell near the resistance, capitalizing on the predictable price movements within this range. Tools like the Relative Strength Index (RSI) and Stochastic Oscillator help identify overbought or oversold conditions, making this strategy ideal for markets where price action is contained within well-defined boundaries.

  • 3

    Breakout Strategy

    The breakout strategy focuses on entering trades when the price breaks out of a defined range or chart pattern, such as a triangle or rectangle, usually accompanied by high trading volume. Traders place buy or sell orders just above or below the breakout level, anticipating that the price will continue to move in the direction of the breakout. This strategy is particularly effective during periods of high volatility and when major economic events or news releases drive the market.

  • 4

    Carry Trade Strategy

    In a carry trade strategy, traders borrow in a currency with a low-interest rate and invest in a currency with a higher interest rate, aiming to profit from the interest rate differential. This strategy works best in stable market conditions and requires careful analysis of both the economic environment and the central bank policies of the currencies involved. The key to success with this strategy is to align the trade with broader market trends and avoid currencies that may experience significant depreciation.

  • 5

    Scalping Strategy

    Scalping is a fast-paced strategy that seeks to profit from small price movements within the Forex market. Scalpers make numerous trades throughout the day, holding positions for just a few minutes or even seconds. They rely on technical indicators like moving averages, Bollinger Bands, and the MACD to identify quick entry and exit points. Due to the small profit margins, tight spreads, and rapid decision-making are essential for success in scalping, making it suitable for traders who can dedicate time to continuous market monitoring.

New forex traders want to equip themselves with the best tools on the market to get the maximum from their trading business. We orient you to some of the latest and most valuable tools for every forex trader.

  • 1

    Charting Software

    TModern forex trading platforms come with charting services that operate in real-time. For example, MetaTrader 5 has charting software included in the trading platforms, although there are a few variations between the two. Before you begin, make sure you understand how each one works.

  • 2

    Economic Calendar

    An economic calendar provides a forex trader with valuable data related to economic events that can impact a set of currencies when this becomes newsworthy. This is thus an essential tool for a forex trader to have. The types of data displayed include the gross domestic product of a country, inflation figures, employment statistics, and the dates when central banks have meetings.

  • 3

    Trade Journal

    Keeping a trading journal helps traders improve by tracking their past wins and losses. By reviewing these trades, you can spot areas where you need to get better. Many companies offer software for this, but you can also create your own journal using a simple spreadsheet. Tools like Edgewonk or just a basic spreadsheet are great for keeping detailed records of all your trades.

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