Forex trading – understanding the basics before you start

1 min read

Forex trading is all about buying and selling currencies on the foreign exchange (forex) and hopefully making a profit along the way. There are two major benefits of forex trading; you don’t need to have a fortune to get started and the ‘interbank market’ is available 24 hours a day, 5 days a week.

This may make forex trading sound like an attractive prospect but it’s important to realize that this type of trading involves a significant amount of work, if you want to stand the best chance of being successful. Don’t believe everything you read about trading on the forex market; it’s not a quick route to riches. However, if you get reliable forex advice, and build your knowledge and expertise, it’s certainly possible to make money as a forex trader.

Why Forex trading knowledge is so important

You’ve probably seen all of the advertisements across the Internet, tempting people with the promise of forex trading courses that pave the way for untold riches. The truth is that you’re not suddenly going to be a forex expert after one course. You need to work hard and build your knowledge over time.

  • Read books and articles by reputable experts. You can always gain from the knowledge of others who have been successful.
  • Join online discussion groups where you can ask questions and keep up to date with the latest forex trading news.
  • Research the reputation of brokers and forex ‘experts’ before you spend any money on their services. Pay attention to the experiences that others have had and don’t take claims at face value.
  • Learn from every gain and loss as you trade.

You can continue to learn every day that you trade. If a system doesn’t work then you tweak it or change it. Most of the forex traders that make significant amounts of money have spent years perfecting the art.

Forex trading

What does Forex trading involve?

You can see that you can’t learn everything you need to know about forex trading straight away. However, it helps to know some of the basics as a starting point.

Every trade on the forex market involves a pair of currencies. For instance, EUR/USD represents a euro/US dollar pairing. If you see the EUR/USD rate quoted, this is the number of US dollars you can buy for one euro. The value of currency pairs moves in pips. A pip is usually the fourth decimal place in the currency pair and it has a monetary value. This means that every pip rise increases your overall profit. Of course, this also means that a pip move in the other direction is a loss for you.

You can see that small changes in forex market prices can quickly lead to significant profits and losses. This is why it’s important to study countries and their currencies before you buy and sell. Knowing about the current standing of a country, and its financial stability is essential if you want to succeed in forex trading in the long term.

There is no substitute for effort, experience, and acquisition of knowledge in the world of forex trading. Trying to use the market as a fast past to wealth is unlikely to work.

Jeremy Biberdorf Jeremy Biberdorf is a long term online marketer turned financial blogger and online entrepreneur. You can check out his investing and finance blog at

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