Next is learning the basics of trading forex. You also receive hands-on recommendations on the best forex trading training resources. Want to start learning forex trading the real way? The best time to trade in the forex market is when trends are moving and volatility is high.

This, however, will either affect your trading strategy or vice versa. Also read : What is the Easiest Way to Start Trading? By now you have a basic knowledge of Forex trading. But should you have a few questions, perhaps there are some dots you want linked together just now, use the comment box.

You are never alone. Ibrahim Clouds is a writer, award-winning poet and an architect. If he's not found jumping from an online course to another, he's in his favorite spot of meditation, as a yogi and a spiritual teacher.

One thing to never forget about him is his love for wealth-creation. The article is transparent and eye-opening. I am a beginner in Forex and I would like to get tutorials from you. Thank you so much and Good. job Ibrahim. Every business requires a certain temperament and approaches, the same with forex. Before starting Forex Trading, you have to make some preparations, to get the best results. Much love.

Your email address will not be published. Notify me of follow-up comments by email. Notify me of new posts by email. Here GBP is the base currency and USD is the quote currency. These are quoted by the brokers or Market Makers who facilitate such trading. Bid price is referred to as the price at which the buyer would want to buy the foreign exchange and the Ask price, the price at which the seller is offering the foreign exchange. For example, if the pair of USDCAD is trading at 1. Like 1 EUR against US Dollar.

The currency pairs in which the foreign exchange is done are divided into three major categories. The demand and supply is what makes the forex exchange market move. Demand for one particular currency against the other is what decides the exchange rate of the currency pair and hence move the market.

The fluctuation in the demand and supply of these currencies affects the exchange rate. Eg: If there is an increase in demand for US Dollar due to global fundamental shift, then it will rise against most other currencies that have weaker demand than US Dollar.

In case of present times, where we are facing the global Covid pandemic, strong economies like USA, considered as one of the most powerful economies, has also been affected by this pandemic.

Any changes in the economic activity of the countries affect their trading abilities and hence, affecting their currency rates. This has made the once stronger currency, like USD, weaken to some extent in the current situation due to weak economic outlook in the US.

The currency pairs with USD can be now bought and sold in the forex market cheaper than before. Economic conditions in a country have a major impact on the exchange rate of their currency. The inventors speculate the rise or fall of a currency vs the currency pair. As speculation comes in the picture, the speculation is solely done on the economic news that is seen and read on daily basis.

The economic news is followed and studies. Decisions are made basis rise or fall in the world economy on daily basis. There may not be any positive or negative news, but based on what the market participants feel about the economic and market conditions, the currencies can get affected.

Hence, market sentiments too should be kept in mind while taking any trading decisions. If you like what we do, and are ready to uphold solutions journalism, kindly donate to the Ripples Nigeria cause.

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Forex, derived from foreign exchange, is the process of exchanging one currency for another. While foreign exchange is standard in international business, Forex trading is also a popular form of investing for private citizens, called retail traders, in Nigeria.

The Forex market is the largest and most liquid financial market in the world, with a daily trading volume of approximately 2 trillion Naira 6. And Forex trading is buying and selling currencies on this market. A forex trader will buy a currency at the current market price and sell it again at a target price in the future. It is only because of this market volatility that Forex traders can make a profit.

Even though the Forex market operates 24 hours a day , market volatility tends to peak during the regular opening hours of the stock markets in Sydney, Tokyo, London and New York.

The highest volume of trading generally occurs at the overlap of the London and New York opening hours, and this is when Forex traders are most active. Note that because Nigeria is approximately on the same time zone as London, we are well placed geographically to take advantage of these market opens during regular working hours. The only way for retail traders to access this international market if via an intermediary called a Forex broker.

A Forex broker will provide the trading software and market access for their clients, so a trader can do market research and buy and sell currencies. These are our top four choices of brokers for beginner traders. A Forex trade has four main components — the asset , the size of the trade, the price , and the direction buy or sell. Each of these is unique and affects the profitability of the trade. In Forex trading, the asset is always a set of two currencies called a currency pair.

Currencies are quoted in pairs, as the two currencies in a pair are bought and sold simultaneously. The first currency of any pair is called the base currency and the second currency is called the quote currency. The value of a currency is called a quote or a price. As currencies are quoted in pairs, the value of the quote currency is set in relation to the base currency. In Forex trading, the change in price of one currency relative to another is what generates a profit or loss.

Price fluctuation or the difference between two prices is often measured and expressed as a value in pips. The value of a currency pair is expressed using a two-price quotation system: One price is for buying — or going long — and is called the ask price , this will be slightly above the market price.

The other price is for selling — or going short — and is called the bid price , this will be slightly below the market price. The prices are set by your broker and the difference between the two is called the spread. The spread is measured in pips and is often the largest component of your trading costs.

Some brokers offer very tight spreads, often based on the raw interbank rate, and in these cases you will pay commission on every trade. The size or volume of a trade is measured in lots.

This is similar to how stocks equities are measured in shares and gold, which is measured in ounces. One standard lot is , units of a currency pair. One micro lot is 1, units of a pair. In most cases, a micro lot is in most cases the smallest trade you can place, though some brokers will offer nano lots of for smaller account types. Trading with leverage involves borrowing money from a liquidity provider to greatly increase the size of your trade.

A trader will place a small deposit, known as the margin , and the rest of the trade value will be leverage. Your profit or loss will be based on the full value of the trade, not just your margin. Most CFDs are traded with leverage because they allow traders to open much larger positions than their account balance would normally allow. Using high leverage can increase your profit potential considerably but will also considerably increase your risk.

Traders who use excessive leverage are exposing themselves to significant losses. Here is an example to demonstrate how leverage can be used to place larger trades with less capital:. You have access to leverage of You place a trade of 0.

One mini lot is 10, units of the pair, which means the value of your trade is USD 10, Although the notional value of the trade is USD 10,, only USD 20 of your account is engaged in opening the trade because leverage means that you need to put down only 0.

CFD traders can speculate on whether an asset will increase or decrease in value and can profit either way. Profiting from the decreasing value of an asset is unique to CFD trading.

Long is the term used for buying, where the trader speculates that the price of the base currency will rise relative to the quote currency. In simple terms, you will make money from a long buy position if the price of the currency pair rises. Short is the term for selling, where the trader speculates that the price of the base currency will fall relative to the quote currency. In simple terms, you will make money from a short sell position if the price of the currency pair declines.

You speculate that the EUR will increase in value against the USD and you buy 1 micro lot at 1. You set a stop loss at 1. One micro lot 0. The euro strengthens against the U. dollar and hits your profit target at 1.

So, pips multiplied by USD 0. The euro weakens against the U. dollar and hits your stop loss at 1. Like all markets, currency prices are set by supply and demand. But the constant shifts in supply and demand of the dozens of frequently traded currencies makes the Forex market more complex than most. Happily, there a few indicators that traders can use to help them predict price movement.

National economic policy, set by central banks such as the Bank of England in the UK or the Federal Reserve in the USA, can have major effects on currency prices. If economic policy changes without warning it can create major fluctuations in currency value.

This resulted in a huge increase in the value of the franc versus the euro — moving from 1. Current events can also affect the price of a currency. The ongoing Brexit debacle in the United Kingdom is a perfect example: Large investors like to move money into strong, predictable economies; so as Brexit uncertainty continued institutional investors moved their capital out of the country, decreasing demand for the GBP and causing it to lose value.

Once it appeared that the British Parliament had successfully agreed on a Brexit deal, the value of the GBP rose again. You can see this effect anywhere you look in the world, if a good piece of economic news appears about a nation-state, its currency will increase in value.

All trading strategies will require you to engage in market analysis in order to be successful. Market analysis can be grouped into two general types; fundamental analysis and technical analysis.

Fundamental analysis is the study of macroeconomic trends and their effects on price, this form of analysis requires a sound knowledge of economics and current events. In the broadest sense, Fundamental traders try to buy currencies from stronger economies at a low price and sell currencies from underperforming economies. Fundamental traders are often reliant on scheduled news events that alter currency price. A good example is the Non-Farm Payroll NFP report in the United States ; the NFP is released on the first Friday of every month and details how many jobs have been added or lost in the US economy.

Fundamental analysis can be tough for traders unfamiliar with finance data but for traders who have a firm grasp of the financial news, and understand macroeconomics, this is a very successful approach. Technical analysis is the prediction of future price action based on historical price data. Technical traders make heavy use of charts and will often rely on a variety of tools and indicators to help them identify trends and patterns.

Almost all technical analysis is based in Dow Theory , a set of principles laid down in the 19 th century by Charles Dow to describe and predict the movement of the stock market. The most common form of technical analysis is price action trading , which is essentially the analysis of the actions of all the other market participants. Technical analysis can be tough to learn, but once you have a good understanding of the basics it can be used in any financial market, not just the Forex market.

All good traders will use a combination of fundamental and technical analysis to find opportunities in the Forex market and there are several great tools we recommend to get you started:. Whatever form of analysis you focus on, these tools will help you find your feet and do a lot of the hard work for you — especially on the technical side. Once you get to grips with technical analysis you will probably want to start customising your platform with indicators and algorithmic trading bots that can automate your trading strategy.

The best way to learn the basics of Forex trading is to practice on a demo account and place a few trades. Some brokers have local Nigerian support teams, work with local Nigerian banks, and offer support from their local offices in Lagos.

We still have plenty of good information waiting for you! Take a look at the articles below to further develop your skills and knowledge…. Expect to learn a lot before trading profitably. You need to learn how to operate the software, do analysis, and manage the risk in the account.

We have an education section to continue reading and explore many of the principles to succeed in trading. Here are articles most relevant to getting a good start.

Please log in again. The login page will open in a new tab. After logging in you can close it and return to this page. By Jeffrey Cammack. Forex Trading: How Does It Work? Components of a Forex Trade The Asset: Currency pairs The price: Forex quotes Trade size: Lots, mini lots, micro lots and nano lots Trade direction: Going long or going short What affects currency exchange rates? Central Bank Economic Policy Current Events Trading Strategy Fundamental Analysis Technical Analysis Analytical Tools Conclusion Essential reading.

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For those who are anxious to test the forex market with paper money, they could also open a demo account with forextime via the daily forex website for free. For example, if the pair of USDCAD is trading at 1. It allows you to trade just about any currency pair without any financial commitment. Netting and hedging? If it goes high, it implies excessive money circulation in the market.

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