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Trading Forex with M4Markets
At M4Markets, the goal is to offer the traders a unique experience in the financial markets and provide them with the best-in-class technology to set them in a path for success.
Beginner traders should start their trading journey by educating themselves as much as possible. Having a solid foundation in Forex and CFD trading is often overlooked, but it is nonetheless essential for success.
Because of how fast everything moves and how easily accessible forex trading is, beginner traders often skip the all-important step of learning the fundamentals. To ensure that the traders will start their trading journey on the right foot, M4Markets has put together a very short and to-the-point eBook.
In the following pages we explain the basic concepts of Forex and if you are a forex beginner you will be able to create a solid foundation which will allow you to take your first steps in the global markets.
M4Markets is committed to offering you a premium experience in forex trading and the team of experts will be happy to assist with any questions you may have.
- Register & Verify your Profile
Complete our Registration Form and access the Client Portal. Complete your Economic profile, upload the required documents and verify your profile.
- Open a Live Account & Fund It
Choose “Open Live Account” under the Accounts tab and select an account. Click “Deposit funds” under the funds tab to select your funding method.
- Download your Platform & get Started
Choose “Downloads” tab underTrader’s Menu and download your Preferred Platform. Launch your platform and start trading.
What is Forex?
Forex, also known as the foreign exchange market, is a financial market where participants trade and exchange currencies. It is the largest and most liquid financial market in the world and it is significantly larger than the stock market. In a sense, whether we are aware of it or not, we all participate in Forex trading. For example, let’s say you live in the United States and are planning to go on a trip to Europe and you will need to exchange your US Dollars for Euros; when you go to the bank or the Exchange booth at the airport in order to change the currency, you will actually be participating in the Forex market.
Similarly, when companies do cross border transaction with other companies around the world to conduct business internationally, they need to follow the same procedure and are also participating in the Forex market.
In Forex the trading is managed electronically over-the-counter (OTC) or off-exchange as there is no central marketplace. So, in simple words all transactions in the Forex market happens through computer networks between traders and institutions around the world – this could be a central bank, a hedge fund, an automobile company, or a John Smith trading on his laptop in his kitchen or from the beach.
The Forex market is open 24/5 and the biggest volatility takes place when the major financial centers around the world are open (London, New York, Tokyo, Frankfurt, Hong Kong, Singapore, Sydney).
Types of currencies that you need to know
Typically, every country’s currency has a symbol which consists out of 3 letters. Usually, the first two letters represent the name of the country while the 3rd letter identifies the name of the currency.
In forex trading we trade currency pairs which consist of two currencies for example – EURUSD, USDCAD, NZDUSD etc.
The major currency pairs are the ones that have USD on either side. They are the most frequently traded and are usually the most volatile pairs. In forex, volatility is important because it can offer trading opportunities.
Apart from the major currency pairs, there are also two other types of pairs: minors and exotics.
Minors are the currency pairs formed by major currencies other than the USD. So, whereas EURUSD and GBPUSD are major crosses, EURGBP is a minor pair, also known as cross.
Exotic currency pairs are made up of one major currency paired with a currency of an emerging economy such as Singapore, Brazil, Mexico, etc.
A few examples for exotic pairs are USDSGD, USDZAR, USDMXN.
Majors and minors usually offer the lowest spreads. Spreads are the difference between the bid and ask price which makes them attractive for short-term traders. Exotics usually come with higher cost when it comes to spreads.
Who is trading Forex in the world?
Almost everyone who is involved in the currency exchange market trades Forex.
For example: Institutions, Banks, Governments, Retail (home based) Traders, Hedge Funds and Private Companies.
How to start trading Forex?
The basic idea of trading Forex is very simple – that is to buy when the price is low and sell when the price is high. This is similar to any other asset which you would choose to buy when prices are low and sell when prices are high.
Key benefits of Forex trading:
- 24 hours/ 5 days a week availability for trading
- Typically low costs to trade
- Largest financial market which offers exciting
- Easy access – you just need a device with access to the internet
- Custom lot sizes
- Trading with leverage is possible
- High Liquidity
When can we trade Forex?
The Forex market is open 24 hours a day, 5 days a week (6 if we count Sunday evenings). So it is entirely up to you to decide when you would like to participate. However, you should keep in mind that the forex market is impacted by major news such as political events. Choosing to trade during these times could mean that the markets are volatile which increases opportunities, as well as risk.
Forex Trading Example
EUR/USD price at market OPEN: 1.21188/1.21190
You speculate that prices will go up within the day and decide to go long.
You buy €10,000 with a leverage of 1:200 which allows you to open a position 200 times more than
the required deposit for the trade.
EUR/USD price at market close: 1.10503/1.10510
You decide to close your long position and sell at the current price of 1.10503 and make a profit of $6.
Calculation: (€10,000 x 1.10503) – (€10,000 x 1.10436)
Types of Forex Trader you can become
- DAY TRADERS
- Day traders are those who chase several opportunities during one-day time period. Every day trader has his/her own trading style, and they usually trade between 1- 10 trading opportunities per day. These types of Day traders usually like to examine charts of 15 minute to 1-hour time-frames and spend an average of 3-4 hours a day trading.
- SWING TRADERS
- Swing traders are those who hold a trade usually several days and they prefer trading 1 to 4-hour time-frames, while it’s also possible for them to look at daily time-frames. Most Swing Traders view trading as an alternative income source, alongside their day job. These types of traders utilize technical analysis, but they also follow fundamental (economic) analysis. Most retail traders belong to this category.
- Investors are mostly into stock trading and it is rare to find them in the Forex world as there are usually costs associated with holding positions in Forex brokers. These types of traders carry long term trades on higher time-frames like daily or weekly chart as their goal is to locate a large trend and ride it. Investors may hold a trade even for several months until it reaches their long-term price\profit target.
- AUTOMATED ROBOTS USERS
- As the name indicates, this type of traders uses Robots for their trading and as such, their trading is handled automatically. Robots may be developed by each trader or they may be purchased. Robot traders enjoy much more freedom, and some use their free time to look for more trading strategies that will increase their gains. However, it is important to mention that fully automated trading carries risk.
2 Types of Market Analysis that you need to know
- TECHNICAL ANALYSIS
- Analyses repeating patterns on the chart and tries to predict outcome based on historical price behaviour. There are many ways to implement technical analysis and it is considered the most popular and useful way to analyse trading opportunities.
- FUNDAMENTAL ANALYSIS
- This type of analysis relies heavily on real financial data and it us usually taken into consideration before making any trading decision. Fundamental analysis includes concepts such as interest rates, inflation, quantitative easings or the general situation of a country’s economy. Traders try to estimate change in economical data to predict its impact on the future price of the asset they are interested to trade.
Forex terms that you need to know
To get off to a great start in the Forex world, it is important to ensure that you are familiar with the main concepts of forex trading.
Below you will find a list of all the essential terminology:
A pip can be described as a unit of measurement which reflects the change in value between two currencies. For major currency pairs, pips are expressed as the fourth decimal value in a quote.
There is an exception, USDJPY which has only 3 decimals, and pip is expressed as the 2nd decimal.
Leverage can be described as the credit offered by a broker allowing Forex traders to trade larger trading position than they could afford via their own capital.
In other words,. it is the ability to control a larger amount of money while using very little of your own and borrowing the rest. Leverages are generally expressed as ratios, for example: 1:50, 1:100, 1:200, 1:500 etc.
For example, if your initial capital deposit is $1000 and your broker offers a leverage of 1:100, you would then be able to trade up to $100,000.
It’s important however to note that trading with high leverage includes risks.
Margin can be described as a portion of your balance required to make a trade where leverage is utilized. For example, with a leverage of 1:100, you will be able to control $100,000 with a deposit of $1000.
The $1000 deposit is the margin requirement in order to use leverage.
Margins are usually presented as percentage of the full amount of the positions. For example, your broker might require 2% or 10% or 50% margin.
And there are many more words that you need to know before start trading Forex:
- FREE MARGIN
- Free margin is the amount of money that is not involved in any trade and you can use it to take more positions. In other words, free margin is the difference between the equity and margin. If the positions that you opened starts making you money, then once the profit increases you will have greater equity, so you will have free margin.
- MARGIN CALL
- When your margin falls below the minimum required level.
- LOT SIZE
- Also known as trade size. Lot size can range between 0.01 lot and several lots. 100,000 units of currency is the standard size for a lot.
- BID PRICE AND ASK PRICE
- The amount of money a buyer is willing to pay for a security is called as the bid price. Whereas the ask price is just the opposite, which is the amount a seller is willing to sell a security for.
- Spread can be defined as the value difference between the Bid price and the Ask price. The currencies that enjoy the largest liquidity are the ones that enjoy a small bid-ask spread while small and rarely used currencies have a large bid-ask spread.
- RISK / REWARD RATIO
- Also known as RR or RRR. The ratio between the potential loss and the potential profit that you can release when you are about to open a trade. In other words, if you are risking $100 of your capital (in case the stop loss is reached, you lose $100) and there is a potential reward of $500 (if your trade reaches your target level), that would give you a risk – reward ratio of 1 to 5.
- Forex broker is an individual or a firm which acts as an intermediary between the buyers and sells for a commission or fee. Brokers are acting as a “middleman” between the trader and the real market.
- It is the fee offered to the broker by the buyers and sellers for offering the service of buying and selling of a product. There are different commissions that brokers charge and they usually vary between different type of accounts.
- STOP LOSS
- It is the maximum loss that a trader is willing to take if the price moves in the opposite direction. It is used as a risk reduction method to limit a loss. Stop loss is usually an automated order set in the platform which means when price reached the stop loss level, the trade will be closed.
- TAKE PROFIT
- As the name indicates it is the profit level that a trader is willing to take and close the position. When the take profit is set, the trade will automatically close once price reaches this predetermined level.
- TRADING CHART
- It refers to a price chart which reflects the price movement of an instrument over a chosen period of time.
- TRADING STRATEGY
- This is a strategy usually based on technical analysis, which is used to help traders to predict the future direction of an instrument. Strategies vary and can include different trading rules how to enter and exit a trade.
- TECHNICAL INDICATORS
- These are technical tools based on mathematical formulas. Indicators are very popular tools among traders and traders use them to find trading opportunities.
- A bearish market is one which represents a declining price value of an instrument, in other words it reflects a negative price direction, showing signs of weakness.
- The opposite of a bearish market, here the market represents the rising price value of an instrument, showing signs of strength. In other words, it reflects a positive price direction.
- When the price of an instruments keeps decreasing in value (Also referred to as bearish market).
- When the price of an instruments keeps increasing in value (Also referred to as bullish market).
- RESISTANCE LEVEL
- When the price repeatedly reaches upper price level but is unable to surpass it as a result of resistance from the market.
- SUPPORT LEVEL
- When the price repeatedly reaches a lower price level but does not fall below that price as a result of support from the market.
Why choose M4Markets to trade Forex?
There are various reasons to trade Forex with M4Markets.
- Low cost trading
- Start trading with spreads from 0.0 pips and $0 commissions. Choose between the Standard, Raw Spread and Premium accounts and start trading with $5 minimum deposit.
- Wide range of Funding Methods
- Instant deposit and fast withdrawals with the biggest banks and payment providers worldwide.
- Range of Markets
- Trade forex pairs, commodities, indices and stocks at the click of a button.
- Security of Funds
- M4Markets’ clients’ funds are in segregated accounts and M4Markets offers negative balance protection.
- Exceptional Trading Conditions
- Ultra-fast execution with no slippage, no requotes and no rejection of orders.
- Industry Leading Client Support
- 24/5 live support in 10 languages and a well-equipped FAQ support centre.