FOREX CLASS 1

FOREX
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Many wonder what forex is and have many questions regarding this topic, I will be answering some questions in this post

What is FOREX

Please you can ask questions where you don't understand
Forex (FOREX) simply stands for "foreign exchange"

When you ask this question if someone has traded Forex, most people say NO, but that’s not totally true

If you have exchanged your local currency to a foreign currency or exchanged a foreign currency to you local currency you have traded FOREX

An easy way to understand Forex is to think of it as changing money when you go on holiday abroad, when you change money you sell your normal currency and buy another currency at the current exchange rate

Look at this scenario
You are in Nigeria and want to visit The United States of America for the holidays now because you cannot use NAIRA in USA to purchase goods this means you'll have to convert your NIGERIAN NAIRA(NGN) to AMERICAN DOLLARS (USD) using the current given exchange rate
( exchange rate: the present value of one currency compared to another)

And for this instance we'll say the exchange rate between NGN/USD is 0.00212

Simple form
NGN/USD=0.00212
NB: this means it's going to cost us 0.00212 DOLLARS to buy 1NAIRA.

Okay, we know the exchange rates and my bank balance is 250000 NAIRA and want to convert it to DOLLARS since well NAIRA aren't used in USA, we use the exchange rate.

250000 x 0.00212 = 530 DOLLARS

Now 250000 NAIRA would give us 530 DOLLARS

It’s time to come back home to NIGERIA after having a great tour in the US, let us say you spent two months there, and while you were there the Government of NIGERIA and a few friends took care of your spending and you didn’t have to spend the cash, coming back you still have your 530 DOLLARS

Now in NIGERIA, at the airport you visit the foreign exchange bank to convert your DOLLARS back to NAIRA and to surprise the price of DOLLAR appreciated against the NAIRA, the exchange rate between the NIGERIAN NAIRA and AMERICAN DOLLAR is now 0.00200 from 0.00212
In simple form

NGN/USD=0.00200

Note that the price of DOLLAR has increased against the NAIRA,
so we put it this way
530 DOLLARS ÷ 0.00200 = 265000 NAIRA

Now that means you made 15000 NAIRA profit.

That is a FOREX transaction, that’s how FOREX trading is about but you won't be traveling around the world to buy currencies all this is done from the comfort of your home using your smartphone/computer .

How to trade Forex?

Since well we can’t all afford to travel the world and do all these transactions, all this will be done from the seat of your comfort on your computer or phone through a platform called metatrader4 (mt4) offered by your broker of choice (we will get to it later) There are a lot of platforms out there but mt4 is the most popular and it's free to download.

Android : Go to Playstore and search for MT4
IOS : App store and search for metatrader4
Desktop : Google search MT4

Where is forex?

Unlike other financial markets like the new york stock exchange( NYSE) which is located in New york or Johannesburg stock exchange there is no central location for the Forex market, forex market is decentralised , and the market is so large it's very unlikely to be moved by any one person or company but you have to know there are those that have influence on the market.

Why trade forex? ?

Currencies consistently need to be exchanged to transact business throughout the world, this have increased over the years. Daily volume of trades in the London Stock exchange is 7 billion dollars but the daily volume of trades in the Forex market is over 5 trillion dollars. Trading successfully in the Forex market brings a fraction of that money to you.
Forex trading can be your major source of income as many are making millions of Dollars daily, it can also be an extra source of income for those who want extra cash.

What is traded in the Forex Market?

Here we are dealing with currencies and we should know which are very "important" to look at and which are less important, The most important currencies are called "Major currencies"

USD - United states Dollar
EUR - Euro
JPY - Japanese Yen
GBP- Great British Pound
CHF - Franc
CAD - Canadian Dollar
AUD - Australian Dollar
NZD - New Zealand Dollar

NB: Currency symbols always have 3 letters, where the first two letters identify the country, the last letter is the country's currency except in some cases.
Forex trading is the simultaneous buying of one currency and selling of another and vice versa.
Because you are not buying physically forex can be complicated, think of it as buying a share in that country.

In Forex trading when you buy, say the Great British Pound, you are basically buying a share in Britain, you are predicting that the British economy is doing well with the hope that it'll be profitable.

The objective of Forex trading is to exchange one currency for another in the expectation that the price will change in your favour, so that the price you bought will increase in value compared to the one sold. Like the example of the vacation I gave earlier.

And all of this is done through trading platforms such as mt4 and I advice everyone to have a demo account and practice your way to success.

Currencies are ALWAYS traded in pairs through a broker (dealer).
There are two main types of brokers:

1⃣ Dealing Desks (DD) : also called Market Makers which trade against their clients(most of the times) they make money through spreads and providing liquiduity to their clients.

2⃣ No Dealing Desks(NDD): these can be divided into two STP or STP+ECN

    2.1. STP : Normally put a mark-up on their quotes.

    2.2. ECN : They normally have little or no spreads, they charge commissions when placing a trade.

NB: you will experience these types of brokers the more you research on it

Currencies to look at:
Major currencies also make up the major currency pairs
Which is where a Major Currency is paired with United States Dollar

I.e.

Eur/usd
Usd/jpy
Gpb/usd
Usd/chf
Usd/cad
Aud/usd
Nzd/usd

NB: as forex beginners I strongly recommend that you only trade the majors(for a while) and stick to Atleast one to two pairs.

Currency pairs that don't contain the USD are known as cross currency pairs/minors .

Eg.

EUR/CAD
AUD/JPY
GBP/CAD

And then there are other " currency pairs" known as EXOTICS

These include a major and a currency from an emerging economy

Eg.
USD/ZAR
USD/MXN

Where does the money come from?

Quite simple, Trading forex is the exchange of one currency in terms of the other(this transaction happens so quick you could transfer over 100 billion dollars into your bank account or out of it

When you buy an asset, you sell your money, when you sell your asset you buy money… that is why currencies are always traded in pairs.

Example:
USD/JPY
USD=The one on the left is called a BASE currency.
JPY = The one on the right is called the QUOTE currency

When you sell USDJPY You are selling the base currency and buying the quote currency
When you Buy USDJPY you are buying the base currency and selling the quote currency
See whether the market is going up(bullish) or its going down (bearish) we should be making money either way.
Now one would ask, when do you buy and when do you sell
in the USD/JP
For example

The USD is the base currency, and thus the "basis" of buy/sell.
If you believe that the Japanese Yen(JPY) economy will continue to weaken, you would execute a BUY USD/JPY Order. By doing so, you have bought the dollars in the expectation that they will rise versus the Japanese Yen
And if your analysis of the market news was correct you'll be swimming in profits

Forex trading is not gambling and Forex is not a "Get-rich-quick" scheme where you donate and receive 30% monthly payment, Forex trading is not a Ponzi scheme.

Forex need you to study and study, if you are not ready to study, then you just want to gamble and can loose money, even all your capital.

Yes it is possible to loose all your capital
Note : You cannot separate loses from Forex, you win some and can also loose some, but with right knowledge and proper money management your profits will by far outweigh your loses and you will be swimming in money

People are making millions of dollars daily from the Forex Market

You can be one of us

You learn to earn

Don’t trade alone, find a trading partner you analyse your trades with.

First start trading on a demo account

Don’t forget that its possible to loose all your capital if trades go bad.