FOREX 101

Nancy C. Batalon
XM Affiliate
WHAT IS FOREX?
 A global market that
allows the exchange of
one currency for another.
 The Foreign Exchange
Market is the largest
financial market in the
world that has a trading
volume of $5 trillion a
day.
 The forex market is open
24 hours a day and 5
days a week, only
closing down during the
weekend.
WHAT IS FOREX
 It is the simultaneous buying of one
currency and selling another.

TRADING?  Currencies are traded through a broker or

dealer, and are traded in pairs.
 SYMBOL COUNTRY CURRENCY NICKNAME
USD United States Dollar Buck
EUR Eurozone 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

WHAT IS TRADED MONEY

IN FOREX?
Pairs Countries FX Geek Speak
EUR/USD Euro zone/United States “euro dollar”
USD/JPY United States/Japan “dollar yen”
GBP/USD United Kingdom/United States “pound dollar”
USD/CHF United States/Switzerland “dollar swissy”
USD/CAD United States/Canada “dollar loonie”
AUD/USD Australia/United States “aussie dollar”
NZD/USD New Zealand/United States “kiwi dollar”

MAJOR  The currency pairs listed are considered the

“majors”. These pairs all contain U.S. dollar
CURRENCY (USD) and are the most frequently traded. The
majors are the most liquid and the widely
PAIRS traded currency pairs in the world.
MAJOR CROSS-CURRENCY
PAIRS
 Currency pairs that don’t contain USD are known as cross-currency pairs, minor currency
pairs, or simply as the “crosses”. The most actively traded crosses derived from the three
major non-USD currencies: EUR, JPY, AND GBP.

EURO CROSSES

Pairs Countries FX Geek Speak

EUR/CHF Euro zone/United States “euro dollar”
EUR/GBP United States/Japan “dollar yen”
EUR/CAD United Kingdom/United States “pound dollar”
EUR/AUD United States/Switzerland “dollar swissy”
EUR/NZD United States/Canada “dollar loonie”
HOW TO READ
THE CURRENCY
PAIRS
 Currencies are always quoted in
pairs, such as GBP/USD or
USD/JPY. The reason they are
quoted in pairs is because, in
every foreign exchange
transaction, you are
simultaneously buying one
currency and selling another.
 Here is an example of a foreign
exchange rate for the British
pound versus the U.S. dollar: you
have to pay 1.51258 USD to buy
1 British pound.
THE BID, ASK
AND SPREAD
 The bid is the price at which your
broker is willing to buy the base
currency in exchange for the quote
currency.
 The ask is the price at which your
broker will sell the base currency in
exchange for the quote currency.
 The difference between the bid and the
ask price is known as the SPREAD.
 THE PIP
 The unit of measurement to
express the change in value
between two currencies is called
a “pip.”
 Most pairs go out to 4 decimal
places, but there are some
exceptions like Japanese yen
pairs (they go out to two decimal
places).
THE PIPPETE
 There are forex brokers that quote currency pairs beyond the standard “4 and 2” decimal
places to “5 and 3” decimal places.
 They are quoting FRACTIONAL PIPS, also called “pipettes.”
THE LOT IN FOREX
 the number of currency units you will buy In EUR/USD (1 lot)
or sell.
 Standard: 1 pip = $10
 Standard: 1 lot = 100,000 units
 Micro: 1 pip = $1
 Micro: 1 lot = 1,000 units
 THE MARGIN AND LEVERAGE
 Margin the amount of money you are required to
deposit with your trading platform in order to
order and maintain positions in the forex market.
Margin is used as collateral to ensure you can
cover any losses you might incur on your
positions.
 Leverage is the ability to trade a larger amount
with a much smaller amount in your account.

  if you set your account at a leverage of 50:1, the

margin that you will need to set aside is 2% of
your trade size
 If you want to trade $10,000 having 50:1
leverage, you will need to have a $200 balance
in your trading account in order to open a
position.
TYPES OF ORDERS
 Market Execution - an order to buy or sell
at the best available price.
 Stop Loss - a type of order linked to a
trade for the purpose of preventing
additional losses if the price goes against
you.
 Trailing Stop - a type of stop loss order
attached to a trade that moves as the price
fluctuates.
ORDER TYPES
 Market order
It is an order to buy or sell at the best available price.
 Limit Entry Order

It is an order to buy below the market or sell above the market at a certain price.
 Stop Entry Order

It is an order placed to buy above the market or sell bellow the market at a certain price.
 Stop-Loss Order
It is a type of order linked to a trade fro the purpose of preventing additional losses if the price goes
against you. REMEMBER THIS TYPE OF ORDER. A stop-loss order remains in effect until the position is
liquidated or you cancel the order.
 TRADING SESSION
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SYDNEY
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NEW YORK
MARKET ANALYSIS
 Technical Analysis

Technical Analysis is the framework in which traders study price movement.

 Fundamental Analysis
Fundamental Analysis is a way of looking at the market by analysing economic, social, and political
forces that affects the supply and demand of an asset.
TYPES OF CHARTS
1. Line chart
TYPES OF CHART
2. Bar chart
TYPES OF CHART
3. Candlestick chart
READING CANDLESTICK
PATTERN
 Bullish candle  Bearish candle

This tells you that there are more buyers than Bearish candle tells you that there are more
sellers in the market. sellers than buyers in the market.
TREND LINES

 Uptrend

A bullish trend line has a positive

slope and is formed by connecting two
or more low points. The second swing
low point must be higher than the first
swing low.
 Downtrend

A bearish trend line is formed by

connecting two or more high points. The
second swing must be lower than the
first swing high.
TREND LINES
 Sideways

It is the price in the market is raging, do not trade if you are not a seasoned trader.

Some important things to remember about trend lines:

o It takes at least two tops or bottom to draw a valid trend line but it takes THREE to confirm a trend line.

o The STEEPER the trend line you draw, the less reliable it is going to be and the more likely it will break.

o Like horizontal support and resistance levels, trend lines become stronger the more times they are tested.

o And most importantly, DO NOT EVER draw trend lines by forcing them to fit the market. If they do not fit right then
the trend line isn’t a valid one.
WHEN NOT TO TRADE
• Bank Holidays – if they are on holiday then the volume of transactions being carried out is
greatly reduced.
• News – there are scheduled news releases and economic news throughout any given day.
• Speeches – central bank leaders and politician speeches can cause a lot of
speculation in the market which results in a lot of price movement.
• Erratic Periods – There will be times where a currency is moving differently from normal.
Perhaps price is spiking and you don’t know why. This is a good time to stay out of the
market.
• Weekends – It is not recommended to hold trades over the weekend unless your method is a long
term strategy which incorporates holding trades for a long time – weeks, months.
• December and Summer Holidays – a lot of bank staff take their holidays on these seasons.
Therefore, the Forex market tends to be slower in these months.
FOREX TRADING IS NOT A GET-RICH-QUICK
SCHEME

Forex trading is a SKILL that takes TIME to learn.

 Skilled traders can and do make money in this field. However, like any other occupation or career, success doesn’t just
happen overnight.
 Forex trading isn’t a piece of cake (as some people would like you to believe).

 Think about it, if it was, everyone trading would already be millionaires.

 The truth is that even expert traders with years of experience still encounter periodic losses.

 Drill this in your head: there are NO shortcuts to forex trading.

 It takes lots and lots of PRACTICE and EXPERIENCE to master.

 There is no substitute for hard work, deliberate practice, and diligence.

 Practice trading on a DEMO ACCOUNT until you find a method that you know inside and out, and can comfortably
execute objectively. Basically, find the way that works for you!!!