FX Education

PROFITINPIPS - Forex Education

 

What is Forex?

  • Forex or the foreign exchange market is one in which a nations currency is traded for that of another at a mutually agreed rate.
  • Forex is electronically ran through a network of global banks, 24 hours, 5 days a week! 
  • It is the largest financial market in the world. Over $5 trillion is traded on a daily basis, compared to the NYSE which mirrors $500 billion per day. 

 

What is a Forex trader?

  • A currency trader, also known as a foreign exchange trader or forex trader, is a person who trades, buys and/or sells currencies on the foreign exchange.

 

Types of Forex Traders

  1. Scalp Traders - Scalpers are quick traders in this market. Meaning they take trades for a couple of seconds or minutes and look to make anywhere from 5-15 pips per trade! They also look at the minute and 5-minute scale on the charts. 
  2. Day Traders - Day traders are the most common type of trader, where they look to trade within the duration of a day. Most day traders look to make 20-50 pips per trade and look at the 1-Hour or 4-Hour scale on the charts.
  3. Swing Traders - Swing traders look for trends within the market and look to hold a position for a duration of a week or until the momentum is broken. Swing traders look for 50-200 pips per trade looking at the 4-Hour and 8-Hour scale on the charts. 
  4. Position Traders - Position traders are a long term swing trader that looks at the trends from a broader spectrum, typically the daily or the weekly time frames for the charts. These traders look to score 250-1000 pips per trade and will usually allow a couple weeks or months to go by. 

 

Why Trade Forex?

The advantages of Forex are low transaction cost and high leverage

 

Forex vs Stocks?

There's no one financial institute large enough to corner the Forex market. In the stock market, companies tend to know more than the average investor.

 

Forex vs Futures?

The Futures Market trades a small amount of 3 billion dollars per day. That's nothing compared to the 5 trillion dollars that is traded in the Forex market daily

 

Forex Market players?

Until the late 1990s, only the “ big guys”  could play this game because your margin requirement was 10 to 50 million dollars. Initially for large institutions and bankers, not for the little guys like us. Thanks to the rise of the internet, online Forex Brokers are now able to offer us everyday retail traders a trading account.

 

Big Banks:

  • Interbank Market includes Citi, JP morgan, HBS, Barclays, Deutshe Bank & HSBC.
  • The largest banks in the world determine the exchange rates.
  • Based on the supply and demand for certain currencies they make the bid, ask and spread that we've learned to love.

 

Companies:

  • Mergers and Acquisitions between large companies can also create currency exchange fluctuations.
  • Companies invest in the Forex market for the purpose of doing business.
    • For example, Apple must first exchange its U.S. dollars for the Japanese Yen when purchasing electronic parts from Japan for their products

 

Governments and central banks:

  • Bank of England, European Central Bank, Federal Reserve are often heavily involved in the FX Market
  • Just like companies, national governments participate in the Forex Market often, for international payments and handling their foreign exchange reserves
  • Central banks affect the Forex Market when they adjust interest rates to control inflation. by doing this they can affect currency valuation

 

When can you trade forex?

  • The FX market is open 24 hours, 5 days a week.
  • There are four trading sessions in the Forex Market, the Sydney session, Tokyo session, London session, New York session.
  • Sydney session: 3 p.m. EST to 12 a.m. EST
  • Tokyo session: 7 p.m. EST to 4 a.m. EST
  • London session: 3 a.m. EST to 11 a.m EST
  • New York session: 8 a.m. EST to 5 p.m EST

 

Best time to trade Forex?

After your technical analysis shows you important price levels to look for and you believe the market has presented you with a trade then it's safe to enter as long as it's not on a Sunday or Friday. Sundays and Fridays tend to have low liquidity in the market, which can make the market more volatile.

 

What are lot sizes in forex?

Standard

100,000 ( quantity)

$10 a pip

Mini

10,000 ( quantity)

$1 a pip

Micro

1000 ( quantity)

$0.10 a pip

Nano

100 ( quantity)

$0.01 a pip

 

What is leverage?

  • If you curious how a new investor like yourself with little funds can trade such large amounts of money.
  • Consider your broker as a bank let you borrow $100,000. all the bank ask is that you give $2,000 as a deposit, which it will hold for you but not necessarily keep.
  • The amount of leverage you will use depends on your broker, we use forex.com which lets us use 50:1 leverage. Meaning if we invest $1,000 our broker will let us borrow $49,000. Compared to having a buying power of just $1000 that extra $49,000 we borrowed from the broker makes it a lot easier to make more profit.

 

How do I calculate profit & loss?

  1. If you buy EUR / USD at 1.2402
  2. With one lot ( 100,000 quantity)
  3. Later the price goes to 1.25 and you decide to close your trade
  4. The difference between 1.25 and 1.2402 is 98 pips
  5. If we multiply the pip value of $10 we have by investing $100,000 time's the pips gained our profit is $980. $10 a pip x 98 pips equals $980 profit

 

Whats the spread?

  • When buying a currency you use the ask price.
  • When you sell, you will use the bid price.
  • The spread is the commission paid to the broker.
  • For example if the EUR/USD bid is 1.145 and the ask is 1.1452. Then the spread is two pips. In this scenario you can buy this currency pair at 1.1452 and you can sell  it at 1.145.The difference of two pips is the commission paid to the broker.

 

What are the three types of analysis?

  • Technical analysis: using past price action to better predict future price action
  • Fundamental analysis: Analyze economic data to enter a trade
  • Sentimental analysis: Each trader has his or her own opinion of why the market is acting the way it does and whether to trade in the same direction of the market or go against it. Although good to keep in mind we recommend keeping emotions out of trading, which is easier said than done. But will make you a more successful trader in the long run.

 

Which analysis is best?

From personal experience and with back-testing we quickly realized that technical analysis is the most effective analysis. Technical analysis works 70% of the time whereas fundamental analysis works less than 50% of the time.

 

How to use the forex platform?

  • In the top left corner you can enter the currency pair you like to see
  • The x-axis is time, either in hours or days
  • The Y axis is the price of the currency pair
  • When choosing a time interval, say for example you are looking at the 4-Hour chart this means that each candlestick is a period of four hours
  • If you were looking at the five minute interval for example this means each candlestick or bar is a period of five minutes
  • We recommend looking at the daily or weekly time frame when determining the currency pairs direction, meaning each candlestick is either a day or a week
  • Green candlesticks tend to mean a bullish time period whereas red candlesticks tend to mean a bearish time period
  • Create a watch list for the main currency pairs we trade for easy access when trading
  • Bullish means the currency pairs going up, bearish means the currency pairs going down

What is an economic calendar ?

The economic calendar is a calendar of dates of significant pre-scheduled events that may affect movement of individual currency prices or markets in part or as a whole. Investors and traders use the economic calendar to plan trades , as well as to be alert to chart patterns and indicators that may be instigated by these events. The economic calendar is available for free on multiple financial and market websites. We will post the economic calendar below, weekly, so you all can be prepared for important data for the upcoming week. Heres this weeks economic calendar.

 

 

How much do I need to get started ?

Aside from joining a chatroom you can get started with as little as $500 invested. This is great because you can leverage your investment! We also recommend starting with an amount you are comfortable with "losing", this is because in a market where anything can happen, we have to trade with no emotions if you are trying to get results. If you trade with money you are tied to, your emotions will be attached to each individual trade. 

Are you guys 100% right all the time?

In a market as volatile as the Forex market, we allow trade opportunities to present themselves rather than chasing for trades. Our track record is near 80% on all trades. Collectively with over 5+ years of experience in the markets, we've developed premium trading strategies with the goal of scoring better trades every time! 

 

How Do I Get Started?

Visit our services page! You must read all our disclaimers and accept terms and conditions prior to joining. With our growing team we are always looking for new members to learn and trade with us along our Forex journey!

 

If you have any other questions or concerns, feel free to contact us via email at profitinpips@gmail.com