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Learn Forex: Important Concepts for New Traders
Learn Forex: Important Concepts for New Traders
by George Polizogopoulos
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The forex market can be a daunting arena for new traders; and
for some, simply not knowing simple concepts means huge losses.
So it is important to learn forex concepts that are
important in trading successfully. As you learn these forex
concepts you may find some concepts familiar while others
foreign. All it takes is a bit of effort and determination to
master a few basic fundamental concepts of forex trading.
As you lean forex one piece of jargon will keep popping
up. "Pips" is the vocabulary word that we are talking about. It
is perhaps the most used word in forex trading. Traders make
money from pip movement. In learning forex you may have noticed
that forex currencies are quoted to four decimal places. If you
remember your high school maths the first decimal place to the
right of the decimal place is the tenths column, the second is
the hundredths and the last is the thousandths column. One
movement plus or minus one thousandth is one pip movement. It
can also be interpreted as a hundredth of a cent. This may be a
little confusing so let's follow up your forex learning with a
few examples. If one currency pair is quoted as $1.1278, a one
pip increase is $1.1279 while a one pip decrease is $1.1277.
When I said that the one pip can also be interpreted as a
hundredth of a cent, here's what I meant: If the currency pair
is quoted at 0.7465 cents then a one pip movement either way is
simply a hundredth of a cent.
It is important that as you learn forex that you understand the
implications of pip movement. In forex you are usually geared in
your trading positions. You have a choice between a regular or
standard account or a mini account so each pip could have the
value of $10 or $1 depending on the amount of leverage you are
utilising. So according to your gearing a positive 10 pip
movement can either mean a $100 profit for a standard account
and a $10 profit for a regular account.
If you are a share trader or have traded in your past you may
already be aware of the importance of trading volume. For those
who are using this article to learn forex, well here it is for
your benefit. Trading volume is used by traders as an indicator
of how much money is being traded at any moment in the charts. A
general rule of thumb is that high volume indicates market
consensus on a price and low volume indicates the opposite.
Highest volumes of
forex are traded during the time at which the
major markets are open for trade.
Finally we will discuss the most basic concepts of selling and
buying into forex positions. When you think and ponder about
buying and selling in leaning forex pursuit you may fall into
the trap that they are easy concepts to master. They are easy if
you put a little consideration and forethought into your initial
trades about your buying and selling foreign currency. You can
make money on both sides of the trade - you can either have a
long view - a view that the currency will increase or a short
view where the currency will decrease. If you don't believe you
can make money when something falls in value, keep reading our
articles to understand that you can also make money when the
market falls. So when you buy into your forex trading position
you are hoping the currency will rise in value. If you sell
short to open a trade you want the value of the currency to fall.
So as you learn forex and understand how the foreign exchange
markets work day to day, you are will be rest assured that these
simple concepts will form part of your foundation of forex
trading. You will need to remember and understand the definition
of a pip, how gearing works for and against you, trading volume
and finally how you enter a trade either with a long or short
view.
This article "Learn Forex: Important Concepts for
New Traders" can be found in our xxx
category. This article "Learn Forex:
Important Concepts for New Traders" can be found in our Foreign Exchange (FX) Markets category.
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About the author:
George Polizogopoulos is a staff writer for
MyShareTrading.com, an information hub for traders:
forex, shares, derivatives, CFD's. MyShareTrading.com also
provides free blogs for traders who wish to share their market
experiences. More information about learning forex is available
on our trading
website.
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