How To Trade Forex?

A step by step guide on how to start forex trading.

Trading Basics

Compared to other financial markets, the forex market does not have a central exchange or a physical location. It runs 24 hours a day through a global network of banks, businesses and individual traders. This indicates that currency exchange rates fluctuate in value against one another at all times, providing numerous trading opportunities.

Start trading forex in 6 steps:

1- Pick your currency pair

The first decision you will need to make as a forex trader is selecting which currency pairs to trade. At AS-HOM GLOBAL, you can choose from a variety of major, minor, and exotic pairs. Before moving on to looking for opportunities in currencies they have less exposure to, new traders often start with those they are familiar with.

2-  Determine the type of forex trade to perform

There are several ways to trade with us. These include CFDs or spread betting.

  • CFD trading – You trade a specific number of CFD contracts in base currency units. If you opt to trade EUR/USD, for example, your investment is in Euro. On the other hand, if you are trading USD/JPY, it is in US dollars.
  • Spread betting (available for UK citizens only) – You trade currency pairs for every point movement, which is typically the fourth decimal point.

3- Decide whether to sell or buy

Following the selection of your market, you must ascertain the current trading price and the direction you anticipate the market will move. Forex pairs are quoted as one currency (base currency) versus another (quote currency),therefore:

  • You buy the pair if you assume the base currency will strengthen against the quote currency or the quote currency will decline against the base.
  • You sell if you assume the quote will increase in value relative to the base currency or the base currency will weaken relative to the quote.

Each currency pair has two prices. The first is the bid or sell price, while the second is the ask or buy price. The difference between the two quoted prices is the spread, which is your trading cost.

4- Add Orders 

An order is a command to carry out an automatic transaction at a later date when currency rates reach a specific predetermined level. Profits are locked in and losses are kept to a minimum using stop-loss and limit orders.

5- Monitor your trading position

Your profit and loss (P&L) changes with each change in the market price when you have an open position. Real-time P&L monitoring is crucial for this reason. You can easily add or remove trading positions in this manner as needed.

6- Close your trading position

Closing a trade is similar to opening a position.If you initially purchased 5 units, you will also need to sell 5 units when the deal is closed. Profits and losses from closed trades are immediately reflected in your trading account.

Are You Ready To Trade Forex Live?

Now that you know how to trade of forex, go straight to

Forex Trading Examples

Here are a few forex trading examples to help you comprehend how the market functions.

The economic calendar is packed with events every month. The NFP, or Non-Farm Payroll, figures are one of the news items that are most eagerly awaited. The US Bureau of Labor Statistics releases it each month, giving traders important information about how the US economy is doing.

Going long (buying) EUR/USD

This is an illustration of a long trade. The US labor market appears to be stagnant. You anticipate that the Non-Farm Payroll (NFP) level will fall short of analyst expectations and that the US Dollar will weaken against the Euro. As a result, you choose to buy  1 Lot ($100,000) of EUR/USD at 1.2101, hence $10 per pip movement.

The report is released and the NFP headline number prints weaker than the experts estimated, causing the US dollar to slump. The EUR/USD pair now trades at 1.2152 and you decide to close the position. You opened the trade at 1.2101 and sold at 1.2152. The difference of 51 pips is your profit ($510).

EUR/USD trading example (long)

Going short (selling) USD/JPY

This is an illustration of a short trade. Recall how we mentioned that we compute profit and loss using the fourth decimal point? The exception to this rule are pairs that contain the Japanese Yen (JPY). Here, however, we focus on the second decimal.

Assume that you open the USD/JPY 1 hour chart in the morning in search of trading opportunities. The pair is currently trading at 113.63, and your technical indicators show a strong likelihood of a market decline.

You sell 1 mini lot ($10,000), which corresponds to a $1 stake per pip movement. This time you decide to add stop-loss and take-profit orders to your position, so that your risk is managed while you are at work. You set your take-profit at 113.27 and the stop-loss at 114.24.

USD/JPY trading example (short)

After that you open your account to check what happened with your position. Your account balance is up by $61. The market moved lower, triggering the take-profit and canceling the stop-loss.

Are You Ready To Trade Forex Live?