An Introduction to Forex
1. Why Trade Foreign Exchange?
Introduction
Interbank Market versus Retail
How technology drove the development of the interbank market
Comparing FX Markets to Stock Markets
How to become an FX Trader
2. Trading Foreign Exchange
FX Terms
  ISO codes
What is a Currency pairing?
  What is a pip or point?
How to read a Currency Price
  Lot sizes vs amounts
3. Trading equipment and basic setup to begin trading
PC setup
Finding the right broker
4. Margin Broking systems
Leverage and Margin
Going Long and Going Short
  Understanding Order Entry
  Limit orders
  Stop Loss orders - OCO orders
  Following your position and margin
  Risk management
   Deciding position size
   Trailing stop losses
5. What causes the markets to move?
Market participants
Fundamentals
  Economic activity
  Interest differentials
  Political factors
  Statements and opinions
  Economic indicators
  Large order flows
  Speculation
6. Beginning on technical analysis
What is technical analysis?
  Why do we use it?
  Learning to read price charts
  Bar Charts - Line charts  - Candlestick charts
7. Identifying Trends
What is a market trend?
  Drawing trend lines
  Channel lines
  Support and resistance
  Retracements
  Elliot wave basics
1.

 

2. Trading Foreign Exchange.

FX terms

 

ISO Codes – each currency is given a three letter code which enables it to be identified by information services like Reuters and the market participants and their back office accounts sections

Symbol Country Currency Nickname
USD United States Dollar Buck
EUR Euro members Euro Fiber
JPY Japan Yen Yen
GBP Great Britain Pound Cable
CHF Switzerland Franc Swissy
CAD Canada Dollar Loonie
AUD Australia Dollar Aussie
NZD New Zealand Dollar Kiwi

 

  • The market puts these codes together to form the 4 majors currency pairs

  • EUR/USD – euro against us dollar – known as Euro in the market

  • GBP/USD – known as ‘cable’ in the market as once there was a cable under the sea between London and New York, the same price was available for GBP against the USD on both continents simultaneously

  • USD/ JPY – dollar yen

  • USD/CHF – dollar swiss

 

What is a currency pairing? What is a pip or point?

 

A currency pair is an expression of the price of one currency against another, and is quoted as one unit of one currency is equal to an amount of the other currency

e.g. GBP/USD is the currency pair for sterling against the US dollar and if the price quoted is 1.5540 then we can say 1 pound= 1.5540 US dollars

Market convention is that a broker must always quote a customer a two-way price which enables the customer to decide without being prompted whether he or she wishes to buy or sell. There is always a ‘spread’ between the two prices.

e.g. a two way price quoted in GBP/USD might be 1.9540/45

In a two way price, the broker displays certain key elements –

1.95 is known in the market as the ‘big figure’ and the market then focuses on the ‘pips’ or ‘points’ of 40-45

1.9540 is the ‘bid’ where the customer can sell GBP to the broker

1.9545 is the ‘offer’ or ‘ask’ where the customer can buy GBP from the broker

 

 

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