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Forex 101:
A beginner’s guide

The aim of forex trading is to speculate on currency price movements (i.e., whether they’ll go up or down). If you guess correctly, you can make a profit!

There are lots of factors that could influence price movements, such as inflation, politics and the economic health of countries, to name a few. If you think the price will go up, you can ‘go long’. If you think it will go down, you can ‘go short’.

What type of trader am I?

There are several different types of forex trading styles.
Which one are you?

The forex scalper

The forex scalper

Forex scalpers hold smaller trades for shorter time frames – sometimes as short as a few seconds! Scalpers are technical analysts and are quick and ruthless during peak trading times. They also tend to commit a large portion of their day to trading.

The day trader

The day trader

Day traders start trading as soon as the markets open, and they stop at the ring of the final bell. They’re also unlikely to hold a trade overnight to avoid any additional risk. Day trading is perfect for those who live by the now, but not the nanosecond.

The swing trader

The swing trader

More fond of long term investments, swing traders keep their trades for weeks, months or even years! Rather than get distracted by price fluctuations, they like to spend time understanding market fundamentals to ensure they buy at ‘swing lows’ and sell at ‘swing highs’ (or vice versa if going short!)

The news trader

The news trader

Ready to act at a moment’s notice, news traders eat the global news for breakfast, lunch and dinner to feed their trading strategies. Reactive and proactive, they monitor breaking headlines and current events to see what could impact the currency markets. Once they’ve got their info, they can act!

Understanding analysis

Fundamental and technical analysis are essential
to making educated trading decisions. Here is a
breakdown of the two:

1 Technical analysis

Technical analysis is the study of past prices and patterns to assist in speculating on future price movements.

To help with this style of analysis, traders will use technical indicators, including:

Simple moving average. This is a common indicator of changes in price behaviour and helps traders get an idea of price trends.

Retail strength index. This helps to determine a market’s accelerating or decelerating direction and evaluates whether a currency is overbought or oversold, potentially signalling an imminent reversal.

Learn more about technical analysis with the help of our short videos.

2 Fundamental analysis

Fundamental analysis is the study of factors that drive valuation, such as economic and political trends and activity.

Fundamental analysis involves studying economic indicators and government policies to determine the intrinsic value of a currency. Once determined, you can make a trade based on whether you think a currency is undervalued or overvalued.

Learn more about fundamental analysis with the help of our short videos.

Market commentary

Keeping up with news and events is key to making better trading decisions and spotting the best opportunities.

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Currency pairs

All forex transactions involve the purchasing and selling of two currencies, which are expressed as ‘currency pairs’. So, if you’re trading the US dollar against the British pound sterling, it’ll be expressed as GBP/USD.

The first listed currency in the pair (in this case, USD) is called the ‘base currency’. You are buying the first currency and selling the second one if you're "long".

The second listed currency in the pair (in this case, GBP) is called the ‘quote currency’. If you're "shorting" you're selling the first and buying the second.

The EUR/USD currency pair is the most liquid pair in the world, followed by USD/JPY.

EUR/USD
USD/JPY
GBP/USD
USD/CHF
AUD/USD
USD/CAD
NZD/USD
AUD/NZD
EUR/JPY
EUR/CHF
NZD/JPY
GBP/JPY
GBP/CHF
AUD/JPY
CAD/JPY
EUR/AUD
EUR/CAD
NZD/CHF
GBP/CAD
CHF/JPY
GBP/AUD
AUD/CHF
AUD/CAD
CAD/CHF
NZD/CAD
GBP/NZD
EUR/NZD
EUR/HUF
NOK/SEK
EUR/TRY
USD/TRY
USD/PLN
GBP/TRY
EUR/PLN
EUR/SEK
EUR/CZK
EUR/NOK
EUR/RON
EUR/RUB
EUR/SGD
EUR/ZAR
GBP/HUF
GBP/MXN
GBP/NOK
GBP/PLN
GBP/SEK
GBP/SGD
USD/CNH
USD/CZK
USD/HKD
USD/HUF
USD/ILS
USD/MXN
USD/NOK
USD/RON
USD/RUB
USD/SEK
USD/SGD
USD/ZAR

Four musts for every
forex trader

1
2
3
4

Understand the markets
for both currencies

Have an understanding of both currencies you are trading as part of the currency pair.

Know their style and
strategy and be structured

This will help you to take emotion out of your trades and predetermine your entry and exit strategies. This approach to trading keeps trades consistent and emotions out of the deal.

Stop, evaluate and listen

Learn from each trade, what worked and what didn’t. Always listen to what your book, the experts and the market is telling you, never your heart.

Find the best broker in the business

You want a reliable trading platform, offering the latest technology, and the best in customer service to give you the best trading experience.

The chart of forex quotes

A forex quote is the price of one currency in terms of another currency in the pair. Both currencies will generate a price, and you’ll be able to see the spread between the two prices.

There are three charts that you can view these positions on:

The chart of forex quotes

Candlestick charts

Candlestick charts are the most commonly used charts as it gives traders the most informed view of the price movement.

These are useful when trading because they show four price points (open, close, high, and low) throughout the period of time the trader specifies.

If the time frame is set to 1 hour per candle then you will see the price movement accordingly, with the bulk of the candle being the open and closing prices and the “shadow” being the highs and lows within the same time frame.

Bar charts

Bar charts are helpful for reviewing the overall price ranges similar to the candlestick charts, but with a simpler design.

Line charts

Line charts are great for forex beginners, as the line connects one closing price to the next to show the general price movement of a currency pair.

Following the line going up or down, it makes patterns easy to identify and the market clearer to read.

Before you forex

Ready to go

Ready to go?

Open an account today and start your Eurotrader journey!

Risk warning: FX and CFD trading involves a high risk of loss.

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