Investment Academy

Forex trading, also known as foreign exchange or FX trading, is the conversion of one currency into another. FX is one of the most actively traded markets in the world, with individuals, companies and banks carrying out around $6.6 trillion worth of forex transactions every single day.While a lot of foreign exchange is done for practical purposes, the vast majority of currency conversion is undertaken by forex traders to earn a profit. The amount of currency converted every day can make price movements of some currencies extremely volatile – which is something to be aware of before you start forex trading.The main participants in forex trading include banks, financial institutions, investors, and individual traders. The forex market is characterized by 24-hour trading, high liquidity, and leveraged trading.

Currency Pair
Major currencies represent some of the world’s biggest economies; they’re the “majors” for exactly this reason.
Major FX Pairs are typically those that involve two Major global Currencies, such as EUR/USD, GBP/USD, USD/JPY, EUR/GBP, USD/CAD
Major currency pairs are very liquid, due to their popularity and therefore the cost of trading is lower than others (ie, Spread).
Other currency pairs can be categorised as “Minors” or “Exotics”.Look the example below:
EUR/USD = 1.07407
The price of EUR/USD shows that 1 EUR is equal to 1.07407 USD. This means that you need 1.07407 Us dollars to buy 1 euro, or that you can get 1.07407 USD when you sell 1 EUR.
Euro, in this case, is the base currency (the price of which we want to determine), and the dollar is the term (quote) currency (in which the price is expressed).
You should always keep in mind that the base currency is the basis for buying or selling.
Pip
A point-in-percentage, or ‘pip’, is the minimum price movement that a currency pair can make. Pips are standardised units that let traders quickly monitor the fluctuations of a currency pair’s exchange rate.
Most forex pairs are quoted to the fourth decimal place, or 1/10,000, making a pip 0.0001 (apart from when the Japanese yen is the quote currency, whereby a pip is 0.01).
Bid Price, Ask Price and Spread
Bid – The price traders or brokers buy a currency pair for.
Ask – The price traders or brokers sell a currency pair for.
Spread – The difference between the buy and sell prices on a trading platform. The lower the spread, the lower the cost to trade is. Lower spread typically is a symptom of a more liquid forex market. Note that spread of each product varies according to market conditions.
Leverage
Leverage allows a large amount of currency to be bought with a small investment. The amount of leverage available to a trader varies with the broker, for example 100:1, meaning that currency trades worth $100,000 can be made with an investment of $1,000. In forex terms, leverage allows the use of credit to buy more currency with just a small amount of money on deposit. That deposit money is usually called “margin”.
Margin
The minimum amount you need to pay to open a position. Margins give forex traders the ability to control positions much larger than their capital reserves. Margin requirements vary according to currency pair and market conditions. During times of extreme exchange rate volatility, brokers might increase the margin requirement of relevant currency pairs.

“CFD” stands for “contract for difference” and consists of an agreement(contact) that that enables investors to speculate on the price movements of financial assets such as stocks, indices, and commodities without actually owning the underlying assets. In a CFD trade, the buyer and seller agree to exchange the difference in value of an asset between the time at which a contact is opened and the time at which it is closed. If the asset’s price increases, the buyer receives the difference from the seller; if the price decreases, the seller receives the difference from the buyer. CFD trading often involves leverage, which means that investors can control a larger trade value with a smaller initial investment, magnifying potential profits but also increasing risks.

The success of forex trading largely depends on analytical skills. The main analysis methods include:
-Technical Analysis:Price charts tell many stories and most forex traders depend on them in making their trading decisions. Charts can point out trends and important price points where traders can enter or exit the market, if you know how to read them.
-Fundamental Analysis:Since currencies trade in a market, you can look at supply and demand. This is called fundamental analysis.
Interest rates, economic growth, employment, inflation, and political risk are all factors that can affect supply and demand for currencies.

The most important macroeconomic data comes out here. First of all, this concerns the pace of economic growth, inflation, indices of business activity, unemployment and so on, and all this data can help with your analysis when trading forex online. But you need to know how to do it.
Suppose core CPI data of the United States is expected to release. If the figure released is above the forecast, this could lead to an increase in the price of US Dollar. Contrarily, if the figure is negative, the currency price could drop.
Employment data is also a high impact economic event. The fact is that higher the unemployment rate, the worse is economic condition of that country. Therefore, it can be considered as one of the major economic indicators.
The unemployment rate is considered important for any country. For example, the Fed has targeted unemployment rate below 5% to reduce its quantitative easing program.
Finally, it is important to pay attention to meetings of central banks. These events are key to the currency. If monetary policy conditions are revised, the currency may rise or fall.

Look here, Support below and resistance above are always horizontal. To build these levels , you need to determine the points where the constant price stop is regularly taking place. Resistance level is an upper limit of price channel, and support level is its lower border. Note that all that is correct for the upward trend only.For the downward movement, it will be vise versa: the resistance level- a lower limit, and the support level -the upper one.

Trend line is a basic indicator of technical analysis.Its main purpose is to determine the present price direction.

The upward trend is determined if both the maximum and minimum points of the price chart are gradually increasing. When the price drops down below the previous low, we can talk about a trend reversal.

The downward trend is defined as a sequence of lower highs and higher lows.

Side Trend (Flat) is determined when the highs and lows are approximately at the same levels.

Learn the different trading order types, from instant execution market orders, to limit and stop orders, available on most trading platforms.

Buy Stop Order—-A buy stop order is a pending order to buy an asset at a specified higher price. It’s an order placed above the current market price, on a market trending up. Buy stop orders are a good method to use for trading breakouts on bullish trends.
Sell Stop Order—A sell stop order is a pending order to sell an asset at a specified lower price. It’s an order placed below the current market price, on a market trending down. Sell stop orders are a good method to use for trading breakouts on bearish trends.
Buy Limit Order—A buy limit order is a pending order to buy an asset at a specified lower price. It’s an order placed below the current market price, on a market trending up. Buy limit orders are a good technique to use for trading retracements on bullish trends.
Sell Limit Order—A sell limit order is a pending order to sell an asset at a specified higher price. It’s an order placed above the current market price, on a market trending down. Sell limit orders are a great way for trading retracements on bearish trends.
Stop Loss Order—A stop loss order is an instruction to close your position if your trade is about to make a loss.
Take Profit Order—take profit order is the exact opposite of stop loss orders. This order type tells your broker to close the position, once the price reaches a certain point.
Market Order—Instant execution Sell by market order and Buy by market order are the most common type of orders and used to execute an order immediately at the next available market price.

Trading risk management is one of the most important topics when it comes to trading. On the one hand, traders want to keep any potential losses as small as possible, but on the other hand, traders also want to squeeze as much potential profit as they can out of each trade.

The reason many Forex traders lose money is not simply due to inexperience or a lack of knowledge of the market, but because of poor risk management. Proper risk management is an absolute necessity to becoming a successful trader.

Here are ten risk management tips, which will help you reduce your risk regardless of whether you are a new trader or a professional:

Educate yourself about Forex risk and trading

Use a stop loss

Use a take profit to secure your profits

Do not risk more than you can afford to lose

Limit your use of leverage

Have realistic profit expectations

Have a Forex trading plan

Prepare for the worst

Control your emotions

Diversify your Forex portfolio