On some Internet sites or in YouTube videos, it often sounds very easy to achieve high profits or even a regular income with foreign currency trading. The practice, however, often looks very different, especially for beginners who have not dealt with the matter. Learning Forex trading is a crucial element in the fact that, in the course of the future, there is even a chance to achieve continual gains with foreign exchange trading at least in the balance. Therefore, we would like to give you as much information as possible as to what Forex trading is learning, how you can proceed and what you should know before you can run the first trade order with your money.
- Margin Call
- Demo Account
- Which currencies to trade?
- Further Education
Simply Explain The Most Important Terms In Forex Trading
One of the basic requirements for forex trading is learning that you are familiar with the customs of foreign exchange trading and, above all, know the most important technical terms. They will hear them again and again and will be confronted with the technical words, so it is important to know at least the most common technical terms and their meaning.
One of the most important terms related to Forex trading is the leverage, sometimes called leverage. It is only because of this lever that it is possible that savers and small investors can participate in foreign exchange trading. The lever represents the capital that the respective broker lends to you. The usual levers move between 50:1 and 400:1. Leverage of 400:1 would, therefore, mean that the CFD broker will lend you a 400 of your own capital stake. This also results in the margin, which is exactly 0.25% for a level of 400:1.
The margin can be translated using the term “security performance” and is closely related to the previously described lever. The broker lends you a multiple of your own capital commitment, but nevertheless, it calls for a small security benefit, namely the margin. How high the respective margin depends on the broker and of course on which lever is being worked on. If, for example, the broker provides you with the 200 of your own capital commitment, leverage of 200:1 is used, the margin is 0.5 percent, relative to the traded value.
The margin is used to deposit and cover open positions at least to a smaller part with capital. Whenever the existing margin is no longer sufficient, some brokers initiate a so-called margin call. This is a warning message to inform you as an investor that your security is no longer sufficient. You must then either provide additional margin, i.e. add money to the trading account, or the broker automatically closes the open position on further declines in many cases.
The lot defines a standard trading size that is realistic in forex trading. A so-called standard lot corresponds to 100,000 units of the respective currency, for example, 100,000 Swiss francs. A mini-Lot is then spoken when it comes to 10,000 units, while the micro-lot refers to 1,000 currency units each. Almost every broker specifies in its terms which lot size must be traded at least. If, for example, this is the standard lot, at least 100,000 units of the respective currency must be traded-naturally taking into account the leverage.
A PIP is the smallest possible price change that can be in a currency pair at all. Depending on which currency pair it is, the PIP usually refers to either the third, fourth, or fifth decimal point. For example, if the price of the US dollar in comparison to the euro is currently 1.0567 dollars, a change in the price of a PIP would be equivalent to the new price of 1.0568 dollars.
Important Forex Trading Tips
Knowing the most important terms that arise in forex trading is a crucial basis for a later successful trade. In addition, Forex trading also involves learning different tips, taking advice and also learning some tricks. In the following section, you can find some tips that have often proved to be very helpful in practice, especially if you are a beginner in the field of forex trading.
Train with the demo account without risk
Probably the most important tip for beginners who are starting with Forex trading is: Use demo account!
Currency to Trade
Start forex trading with standard currency is very important for forex beginners. Those currencies are :
- US Dollar
- British pound
- Swiss francs
- Japanese Yen
Education is the main thing to start anything or learn anything. If you skip anything then it’s harmful to your future. So, To begin with, your education again.