Forex 101
Your complete beginner's guide to forex trading. Master the fundamentals and build a solid foundation for your trading journey.
What is Forex?
The world's largest financial market
Forex (Foreign Exchange) is the global marketplace where currencies are traded against each other. It's the largest and most liquid financial market in the world, with over $6 trillion changing hands daily. Unlike stocks, forex trading happens over-the-counter (OTC) 24 hours a day, 5 days a week.
Global Marketplace
Forex is the world's largest and most liquid financial market, with over $6 trillion traded daily across all time zones.
24/5 Trading
Trade around the clock from Monday to Friday. Markets follow the sun, opening in Sydney and closing in New York.
Two-Way Market
Profit from both rising and falling markets. Go long (buy) when bullish, go short (sell) when bearish.
High Leverage
Control larger positions with smaller capital. Leverage amplifies both profits and losses - use wisely.
Trading Sessions & Market Hours
Markets follow the sun around the globe (all times in GMT)
Sydney
22:00 - 07:00
Tokyo
00:00 - 09:00
London
08:00 - 17:00
New York
13:00 - 22:00
Understanding Currency Pairs
In forex, currencies are traded in pairs. The first currency is the base currency, the second is the quote currency. Example: EUR/USD = 1.1050 means 1 EUR = 1.1050 USD.
Major Pairs
Most traded pairs involving USD
Minor Pairs
Cross pairs without USD
Exotic Pairs
Major + emerging market currency
Essential Trading Terminology
Master the language of forex trading
The smallest price move in a currency pair. For most pairs, 1 pip = 0.0001 (4th decimal place).
💡 EUR/USD moves from 1.1050 to 1.1051 = 1 pip
The difference between the buy (ask) and sell (bid) price. This is the broker's commission.
💡 Bid: 1.1050, Ask: 1.1052 = 2 pip spread
Allows you to control a larger position with a smaller amount of capital.
💡 100:1 leverage = $1,000 controls $100,000
The amount required in your account to open and maintain a leveraged position.
💡 With 100:1 leverage, 1% margin = $1,000 for $100,000 trade
Standard unit of measurement for trade size. 1 standard lot = 100,000 units of base currency.
💡 Standard: 100,000 | Mini: 10,000 | Micro: 1,000
Order Types Explained
Market Order
Execute immediately at the current market price. Best for fast-moving markets.
✓ Pros
Immediate execution
Guaranteed fill
✗ Cons
Price may slip
No price control
Limit Order
Execute only at your specified price or better. Great for precise entries.
✓ Pros
Price control
No slippage
✗ Cons
May not fill
Requires planning
Stop Loss
Automatically close a position at a specified price to limit losses.
✓ Pros
Risk management
Peace of mind
✗ Cons
Can be triggered by spikes
Guaranteed stop may cost more
Take Profit
Automatically close a position at a specified price to lock in profits.
✓ Pros
Lock in gains
No need to monitor
✗ Cons
May exit too early
Misses extended moves
How to Place Your First Trade
Choose Your Pair
Select a currency pair based on your analysis and strategy.
Analyze the Market
Use technical and fundamental analysis to determine direction.
Decide: Buy or Sell?
Go long if bullish, go short if bearish on the base currency.
Calculate Position Size
Risk only 1-2% of your account per trade.
Set Stop Loss & Take Profit
Define your risk and reward before entering.
Execute the Trade
Place your order through the trading platform.
Monitor & Journal
Track your trade and record lessons learned.
Risk Management Fundamentals
The golden rules every trader must follow
1-2% Rule
Never risk more than 1-2% of your account on a single trade.
Risk-Reward Ratio
Aim for at least 1:2 risk-reward. Risk $1 to potentially make $2.
Always Use Stop Losses
Every trade must have a stop loss. No exceptions.
Control Leverage
Higher leverage = higher risk. Start with lower leverage.
Beginner Best Practices
Do This
- ✓Start with a demo account
- ✓Keep a trading journal
- ✓Follow a trading plan
- ✓Use proper risk management
- ✓Continue learning every day
- ✓Accept losses as part of trading
Avoid This
- ✗Trade with money you can't afford to lose
- ✗Over-leverage your positions
- ✗Chase losses (revenge trading)
- ✗Trade based on emotions
- ✗Ignore stop losses
- ✗Expect to get rich quickly
Ready for the Next Step?
Now that you understand the basics, continue learning with Technical Analysis or Fundamental Analysis.