Forex Trading
i
, Forex Trading
About the Tutorial
Forex Market is an exciting place. The one good thing about entering into the forex market
is that you can trade anytime as per your convenience.
The forex market is enormous in size and is the largest market with millions of participants.
Hundreds of thousands of individuals (like us), money exchangers, to banks, to hedge
fund managers everybody participates in the forex market.
This tutorial covers the fundamentals of forex trading.
Audience
This tutorial is prepared for beginners to gain some knowledge before they begin their
journey with trading. Professional who are already into forex trading can also draw benefit
from this tutorial.
Prerequisites
We assume that you know the essential terms related to forex trading and the basic
standards of currency trade.
Copyright & Disclaimer
Copyright 2018 by Tutorials Point (I) Pvt. Ltd.
All the content and graphics published in this e-book are the property of Tutorials Point (I)
Pvt. Ltd. The user of this e-book is prohibited to reuse, retain, copy, distribute or republish
any contents or a part of contents of this e-book in any manner without written consent
of the publisher.
We strive to update the contents of our website and tutorials as timely and as precisely as
possible, however, the contents may contain inaccuracies or errors. Tutorials Point (I) Pvt.
Ltd. provides no guarantee regarding the accuracy, timeliness or completeness of our
website or its contents including this tutorial. If you discover any errors on our website or
in this tutorial, please notify us at
i
, Forex Trading
Table of Contents
About the Tutorial ............................................................................................................................................ i
Audience ........................................................................................................................................................... i
Prerequisites ..................................................................................................................................................... i
Copyright & Disclaimer ..................................................................................................................................... i
Table of Contents ............................................................................................................................................ ii
1. Forex Trading – Introduction..................................................................................................................... 2
What is Forex? ................................................................................................................................................. 2
Why Trade Forex? ........................................................................................................................................... 2
Who Trades Forex? .......................................................................................................................................... 3
When can you trade forex? ............................................................................................................................. 3
Forex Market Hours ......................................................................................................................................... 3
2. Forex Trading – The structure of the forex market .................................................................................... 5
Hierarchy of Participants ................................................................................................................................. 6
Market Participants ......................................................................................................................................... 6
Currency pair ................................................................................................................................................... 7
Commonly Used Currency Pair ........................................................................................................................ 7
The Bid-Ask Spread .......................................................................................................................................... 9
What are Bullish and Bearish Markets? .......................................................................................................... 9
What happens in a Bull Market? ................................................................................................................... 10
What happens in a Bear Market? .................................................................................................................. 10
What is Lot size? ............................................................................................................................................ 11
What is long in forex trade? .......................................................................................................................... 11
What is short in forex trade? ......................................................................................................................... 11
What are Pending Orders in Forex Trade? .................................................................................................... 11
What is Leverage and Margin? ...................................................................................................................... 12
Hedging.......................................................................................................................................................... 13
ii
, Forex Trading
3. Forex Trading – Major Currencies and Trade Systems ............................................................................. 15
Major Currencies ........................................................................................................................................... 15
Different Trade systems on Forex ................................................................................................................. 17
4. Forex Trading – Types of Market Analysis ............................................................................................... 19
Fundamental Analysis.................................................................................................................................... 19
When to use fundamental analysis for the forex market? ............................................................................ 19
Key factors influencing fundamental analysis ............................................................................................... 20
Technical Analysis .......................................................................................................................................... 21
Dow Theory for Technical Analysis ................................................................................................................ 21
Sentimental Analysis ..................................................................................................................................... 21
What type of analysis is better? .................................................................................................................... 22
5. Forex Trading – Kinds of Foreign Exchange Market ................................................................................. 23
Spot Market ................................................................................................................................................... 23
Major Participants on the Spot Exchange Market ......................................................................................... 23
Forward Market ............................................................................................................................................. 24
Future Markets .............................................................................................................................................. 25
Option Market ............................................................................................................................................... 25
6. Forex Trading – Benefits of Trading Forex ............................................................................................... 27
UNIT 2: DRIVING FORCES BEHIND FOREX MARKET ................................................................... 29
7. Forex Trading – Fundamental Market Forces .......................................................................................... 31
Economic Growth and Outlook ..................................................................................................................... 31
Capital Flows.................................................................................................................................................. 31
Trade Flows and Trade Balance ..................................................................................................................... 32
The socio political environment of a country ................................................................................................ 32
8. Forex Trading – Technical Indicators ....................................................................................................... 33
What is a chart? ............................................................................................................................................. 33
Types of Charts .............................................................................................................................................. 33
iii
i
, Forex Trading
About the Tutorial
Forex Market is an exciting place. The one good thing about entering into the forex market
is that you can trade anytime as per your convenience.
The forex market is enormous in size and is the largest market with millions of participants.
Hundreds of thousands of individuals (like us), money exchangers, to banks, to hedge
fund managers everybody participates in the forex market.
This tutorial covers the fundamentals of forex trading.
Audience
This tutorial is prepared for beginners to gain some knowledge before they begin their
journey with trading. Professional who are already into forex trading can also draw benefit
from this tutorial.
Prerequisites
We assume that you know the essential terms related to forex trading and the basic
standards of currency trade.
Copyright & Disclaimer
Copyright 2018 by Tutorials Point (I) Pvt. Ltd.
All the content and graphics published in this e-book are the property of Tutorials Point (I)
Pvt. Ltd. The user of this e-book is prohibited to reuse, retain, copy, distribute or republish
any contents or a part of contents of this e-book in any manner without written consent
of the publisher.
We strive to update the contents of our website and tutorials as timely and as precisely as
possible, however, the contents may contain inaccuracies or errors. Tutorials Point (I) Pvt.
Ltd. provides no guarantee regarding the accuracy, timeliness or completeness of our
website or its contents including this tutorial. If you discover any errors on our website or
in this tutorial, please notify us at
i
, Forex Trading
Table of Contents
About the Tutorial ............................................................................................................................................ i
Audience ........................................................................................................................................................... i
Prerequisites ..................................................................................................................................................... i
Copyright & Disclaimer ..................................................................................................................................... i
Table of Contents ............................................................................................................................................ ii
1. Forex Trading – Introduction..................................................................................................................... 2
What is Forex? ................................................................................................................................................. 2
Why Trade Forex? ........................................................................................................................................... 2
Who Trades Forex? .......................................................................................................................................... 3
When can you trade forex? ............................................................................................................................. 3
Forex Market Hours ......................................................................................................................................... 3
2. Forex Trading – The structure of the forex market .................................................................................... 5
Hierarchy of Participants ................................................................................................................................. 6
Market Participants ......................................................................................................................................... 6
Currency pair ................................................................................................................................................... 7
Commonly Used Currency Pair ........................................................................................................................ 7
The Bid-Ask Spread .......................................................................................................................................... 9
What are Bullish and Bearish Markets? .......................................................................................................... 9
What happens in a Bull Market? ................................................................................................................... 10
What happens in a Bear Market? .................................................................................................................. 10
What is Lot size? ............................................................................................................................................ 11
What is long in forex trade? .......................................................................................................................... 11
What is short in forex trade? ......................................................................................................................... 11
What are Pending Orders in Forex Trade? .................................................................................................... 11
What is Leverage and Margin? ...................................................................................................................... 12
Hedging.......................................................................................................................................................... 13
ii
, Forex Trading
3. Forex Trading – Major Currencies and Trade Systems ............................................................................. 15
Major Currencies ........................................................................................................................................... 15
Different Trade systems on Forex ................................................................................................................. 17
4. Forex Trading – Types of Market Analysis ............................................................................................... 19
Fundamental Analysis.................................................................................................................................... 19
When to use fundamental analysis for the forex market? ............................................................................ 19
Key factors influencing fundamental analysis ............................................................................................... 20
Technical Analysis .......................................................................................................................................... 21
Dow Theory for Technical Analysis ................................................................................................................ 21
Sentimental Analysis ..................................................................................................................................... 21
What type of analysis is better? .................................................................................................................... 22
5. Forex Trading – Kinds of Foreign Exchange Market ................................................................................. 23
Spot Market ................................................................................................................................................... 23
Major Participants on the Spot Exchange Market ......................................................................................... 23
Forward Market ............................................................................................................................................. 24
Future Markets .............................................................................................................................................. 25
Option Market ............................................................................................................................................... 25
6. Forex Trading – Benefits of Trading Forex ............................................................................................... 27
UNIT 2: DRIVING FORCES BEHIND FOREX MARKET ................................................................... 29
7. Forex Trading – Fundamental Market Forces .......................................................................................... 31
Economic Growth and Outlook ..................................................................................................................... 31
Capital Flows.................................................................................................................................................. 31
Trade Flows and Trade Balance ..................................................................................................................... 32
The socio political environment of a country ................................................................................................ 32
8. Forex Trading – Technical Indicators ....................................................................................................... 33
What is a chart? ............................................................................................................................................. 33
Types of Charts .............................................................................................................................................. 33
iii
