dollarLearn Forex Trading A Beginners Guide

The Foreign Currency Exchange or Forex market is the most popular currency option trading platform but it can be very confusing for beginners.

Most people are at least vaguely familiar with some of the terminology and operations of the stock market, but most of us know little or nothing about Forex trading. The average person at least knows what the basic terms used on the stock market are and has some idea of what the stock market does. Yet, foreign currency exchange is alien even to most educated people. You need to pay strict attention when trying to learn Forex trading.

Like the stock market, the Forex market has its own language which confuses most investors. Fortunately, the average investor only needs to spend time and learn Forex trading basics, to get a feel for the market.

One word you hear and see a lot when dealing with currency trading is pip. PIP is an acronym that means Price Interest Point. A price interest point is the smallest value of a currency that is traded on the Forex market. For example, the smallest value of US currency that is traded on the Forex is $.0001. This means you can trade .05% of a dollar on the Forex. The Forex market does this because it lets traders leverage their options. The value of a pip can change based on size of your account. A good rule of thumb is that a pip is the smallest unit you can trade in the Forex market.

The term leveraging means that they can increase the value of an investment by breaking it up into smaller units that can be sold. Using leveraging, you could invest $100 and use it to buy options on $2,000 in a currency. Leveraging is a powerful tool for small investors because it lets them increase the size and scope of their investments. Investors should be warned that leveraging is a two way street. It can greatly increase your earnings but it can also greatly increase your risk and losses.

One of the most important terms that Forex investors should be aware of is stop loss order. A stop loss order is just that, you instruct Forex that you will stop buying when the price falls to a certain level and sell at that level. An automatic stop loss order protects you from risks because investments don

Filed under: Forex General

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