Forex Trading For Beginners

Stop loss is another reason Forex CFDs are popular amongst serious traders. If you aren’t familiar with this term, stop loss is a tool that protects you against runaway losses that can impact your other trades.

When the market moves against a trade and margin limit is reached, open trades start closing until the margin necessary is covered. With stop loss you set a price level that you choose, and your trade will close at that point if you have adequate margin, but only when trading on easyMarkets platform and app is this guaranteed because of no slippage.

CFDs are unique financial instruments favored by investment professionals and institutions, due to their flexibility. CFD Shares, Forex, Commodities and Cryptocurrency allow you to trade both upwards and downwards trends.

easyMarkets offers trading without slippage on its proprietary platforms. This means that the rate you open the trade is the rate your trade is executed. This is important because in non-CFD trading, your trade may execute at a higher or lower price.

This is because when selling or buying non-CFD currencies, transactions need to be “matched”, i.e. if you are selling, a buyer or buyers need to match your trade. If someone (or a group of people) isn’t trading the opposite of your trade, you have to wait until they do.

Some CFD brokers do not offer zero slippage guarantee, so this is another distinct benefit you have access to when you trade on easyMarkets platform and app . Trading with slippage can cause unforeseen costs or smaller profits because the trade opens or closes at a different rate than you wanted it to be executed. This effect becomes especially amplified during high volatility.

Another reason the forex market is popular is due to the availability of leverage. Leverage is a trading condition that allows the trader to increase the size of their trade. Of course, as the size of your trade increases so do your margin requirements and risk. Because of the increased margin requirements, a smaller negative move will cause your trade to close.

Major currency pairs are favored by new traders because of their high liquidity and large amount of available data. News outlets frequently cover events which affect these currencies. Also, many commodities including Oil, Corn, Cotton (to mention a few) and most commercial and precious metals are bought and sold in USD.

Minor currency pairs include the currencies in the list above, but not the USD. For example; AUD/JPY, EUR/CHF, EUR/GBP are minor pairs. Minor pairs also offer large amounts of data, since most of the currencies involved are some of the market’s most popular.

Exotic pairs involve currencies from developing countries and a major currency, such as USD/MXN. These pairs can have less liquidity, depending on which currencies are involved, and are usually considered to be significantly more volatile than major pairs or crosses. As such, exotic pairs are preferred by more experienced traders to round off their portfolio with higher risk trades.

As mentioned above, an instrument’s spread is the difference between bid and ask price. In the case of FOREX trading when we are dealing with a pair, for example EUR/USD, the spread is the difference between the price at which your broker is willing to buy or sell the other side of the pair you are trading.

That may seem a little complicated, so to simplify: EUR is the base currency and USD the quote currency in EUR/USD. When you sell a pair the broker is the buyer of the base currency and when you buy they are the seller of the base currency. The spread is usually calculated in pips and for most pairs it is 0.0001 of the price quote.

Continuing our example, if EUR/USD was 1.1800 and moved to 1.1802 that means it would be a 2 pip price movement. Expanding on that, if your spread is 2 pips, and you “bought” (i.e. expected the pair to increase in price) then anything above that is profit.

Inversely if you were “selling” the pair, if the price went from 1.1800 to 1.1802 then you would incur a 2 pip loss.

Spreads are important because it is what you pay when trading – and you need to make sure if the spreads you are trading with are floating or fixed. Floating means that spreads will increase during market volatility, before and after news events or during geopolitical turmoil (which cases volatility). Fixed spreads on the other hand, when offered by a creditable broker, never change. As mentioned above, this makes calculating costs much easier.

Pips are the way price movements are calculated instead of using 1/10000th of a currency pair’s value. Most currencies are quoted with four decimal points whereas JPY pairs are quoted with just two. This is why a pip is different when calculating currency pairs involving JPY.

For example, USD/JPY is displayed as 111.25. A one pip movement upwards would be 111.26, so a pip would be 0.01 instead of the typical 0.0001.

This can seem daunting when you start trading. Here are few things that you should look for when choosing your first forex broker:

Depending on your needs and level of experience, you may choose to trade through easyMarkets fully featured App, intuitive and robust Web Platform or Metatrader 4.

MT4 is usually preferred by people that have access to a computer, either desktop or laptop. It has many features but also a steep learning curve. easyMarkets platform on the other hand is both intuitive and powerful, and online. This means you can trade everywhere you have an internet connection.

If you want to be optimally mobile, then you can also use easyMarkets App available on Android and iOS; download it on your phone and you can trade forex on the go.