Learn Forex Trading – Free Forex Course for Beginning Traders
Would you like to start trading currencies but feel that success depends on finding the alchemist’s stone? Do you think of currency quotes, technical indicators and economic data such as Merlin’s Magic Book?
Forex trading involves a significant risk, and learning takes time. This course will help you get started and will give you a better understanding of the basics of forex trading. Our educational material will guide you through the jungle of pips, lots, graphics and aspirations to introduce it in the markets.
Our main objective is to accelerate the learning process by providing the most useful information in the simplest way possible. With the power you will gain with the knowledge in these pages, you will be more prepared to satisfy the markets.
Forex Lessons in this Forex Trading Course:
Lesson 1: How to read a currency quote
Lesson 4: Currency Pairs and Their Characteristics
Lesson 6: Forex Technical Analysis
Lesson 7: Forex Fundamental Analysis
Lesson 9: Choosing the Right Forex Broker
Part 1: How to Read a Currency Quote
Currency trading is a form of commodity trading. In the commodity market, traders buy and sell assets such as oil or gold in exchange for foreign exchange. In the currency market (currency trading), the assets bought and sold are currencies. As a result, unlike the basic product, the value of each coin is determined in relation to another. For example, when the forex trader buys an ounce of gold, he must pay it with the US dollar, which generates a quote in which the price of the metal is defined in terms of a currency that is another class of asset. But when the currency trader buys or sells the euro, he must pay it with another currency (Australian dollar, Swiss franc, etc.) in which case the quote created has the same asset class on both sides. The result of this is that it is impossible to speak of absolute value in the currency market because it is possible to value the euro in dollars, francs or yen, each of which is a valid option as an indicator of value. In the case of shares or products, the value can only be indicated in USD; therefore it is possible to speak of an absolute value.
How to Read and Understand a Currency Quote
By downloading and opening the forex broker software of your choice, the first concept you will find is the forex price quote. The quote is simply the record of a previous transaction in which a currency pair changed hands. When two financial actors exchange currencies, the price at which the transaction occurred is called a quote. Let’s see this with an example.
EUR / USD 1.3524
In the previous quote, the currency on the left is the currency that we buy, while the currency on the right is the currency that we sold to finance our purchase. The number means the value at which the coins were exchanged. Or to put it in a brief and simple mathematical form, when we bought 1 euro, the value of one euro was equal to 1.35 USD, and we had to pay a lot to buy the coin.
When running the trade, we are now long term in euros, and short to the dollar (we buy the euro and sell the dollar), in other words, we have an open position. The principle of profit in currency trading is the same as in any other type of commercial activity: buying cheap and selling expensive is our purpose. Consequently, we will wait for the value of the euro to rise above 1.35, for example, to 1.38, where we can close our position by selling the euro and buying the dollars, and making profits. Since our base currency is the dollar, our profit will also be measured in dollars.
Let’s solidify this with an example:
We bought 1,000 EUR for 1,350 USD, with a quote of 1.35. We wait until the price is 1.38, when we close our position selling our 1,000 euros to 1,380 USD. Since our initial trade was worth $ 1,350, the difference between 1,380 and 1,350, that is, $ 30, becomes our profit.