Four steps to making your first trade in forex

 Four steps to making

your first trade in forex

SELECT A CURRENCY PAIR

The nature of forex trading is to exchange the value of one

currency for another. In other words, you will always buy one

currency while selling another at the same time. Because of this,

you will always trade a pair of currencies.

Most new traders start out by trading the most commonly offered

pairs of major currencies, but you can trade any currency pair

we have available as long as you have enough money in your

account. For this walkthrough, we’ll look at the EUR/USD (Euro/

U.S. Dollar).

1

ANALYZE THE MARKET

Research and analysis should be the foundation for your trading

endeavors. Without these, you’re operating largely on emotion.

This doesn’t typically end well.

When you first start researching, you’ll find a wide wealth of forex

resources—which may seem overwhelming at first. But as you

research a particular currency, you’ll find valuable resources that

stand out from the rest. You should regularly look at current and

historical charts, monitor the news for economic announcements,

consult indicators and perform other analysis activities. We’ll talk

more about specific types of research later on.

2

3

Foreign exchange and other leveraged trading involves significant risk of loss and is not suitable for all investors.

Increasing leverage increases risk

EUR | USD

Amount 0

SELL BUY

1.07 173 1.07 191

L: 1.06965 1.8 L: 1.08563

READ ITS QUOTE

You’ll notice two prices are shown for all currency pairs.

For example, a quote for EUR/USD may look like this:

The first rate (1.07173) is the price at which you can sell the

currency pair. The second rate (1.07191) is the price at which

you can buy the currency pair. The difference between the

first and second rate is called the spread. This is the amount

that a dealer charges for making the trade.

Spreads will vary among dealers. FOREX.com offers

competitive spreads on the wide range of currency pairs

offered. View our live spreads

3

PRICE

SELL PRICE

BASE CURRENCY QUOTE OR TERMS CURRENCY

BUY PRICE

4

Foreign exchange and other leveraged trading involves significant risk of loss and is not suitable for all investors.

Increasing leverage increases risk

WITH A BUY POSITION, you believe that the value of the

base currency will rise compared to the quote currency. If

you’re buying the EUR/USD, you believe the price of the

euro will strengthen against the dollar. In other words, you

believe the euro is bullish (and that the US dollar is bearish).

WITH A SELL POSITION, you believe that the value of the

base currency will fall compared to the quote currency. If

you’re selling the EUR/USD, you believe the price of the euro

will weaken against the dollar. In other words, you believe

the euro is bearish (and that the US dollar is bullish).

PICK YOUR POSITION

If you’ve traded stocks, bonds or other financial products, you

know that you can usually only speculate on one direction of the

market: up.

Forex trading is a little different. Because you are buying one

currency while selling another at the same time, you can speculate

on up AND down movement in the market.

4

Let’s see how these would work.

Imagine that you did some research

and decided to enter a trade.

5

Foreign exchange and other leveraged trading involves significant risk of loss and is not suitable for all investors.

Increasing leverage increases risk

EUR/USD EUR/USD

+32 PIPS

Now, let’s say that later in the day, you

look at your position. The EUR/USD

is now at 1.34160/180. Your trade has

gained 32 pips. You decide to close

your position at the current sell price

of 1.34160 and take a profit.

You look at your position later in the

day and discover that the EUR/USD

is now at 1.34160/180. Your trade has

lost 36 pips. You decide to close your

position at the current buy price of

1.34180 and accept your losses.

ENTERING A BUY POSITION

The current price for the EUR/USD is 1.33820/840.

You believe that the euro is bullish, so you decide

to enter a buy position for one lot of the EUR/USD.

Because you are buying, your trade is entered at the

price of 1.33840.

ENTERING A SELL POSITION

Let’s imagine that you believe the euro is bearish. You

decide to enter a sell position for one lot of EUR/USD.

Because you are selling, your trade is entered at the

price of 1.33820.

0.0032 X 100,000 = Your profit is US$320 0.0036 X 100,000 = Your loss is US$360

* The examples shown here are for educational purpose only.

1.33820/840 1.33820/840

1.33840 1.33820

EUR/USD

1.34160/1.34180

1.34160

EUR/USD

1.34160/1.34180

1.34180

-36 PIPS

6

Foreign exchange and other leveraged trading involves significant risk of loss and is not suitable for all investors.

Increasing leverage increases risk

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