Nial Fuller

NIAL FULLER Nial Fuller
Professional Trader, Author & Coach

Part 1: What Is Forex Trading ? – A Definition & Introduction

An Introduction to FOREX Trading:

Hey traders,

This free beginners Forex mini-course is designed to teach you the basics of the Forex market and Forex trading in a non-boring way. I know you can find this information elsewhere on the web, but let’s face it; most of it is scattered and pretty dry to read. I will try to make this tutorial as fun as possible so that you can learn about Forex trading and have a good time doing it.

Upon completion of this course you will have a solid understanding of the Forex market and Forex trading, and you will then be ready to progress to learning real-world Forex trading strategies.

What is the Forex market?

• What is Forex? – The basics…

Basically, the Forex market is where banks, businesses, governments, investors and traders come to exchange and speculate on currencies. The Forex market is also referred to as the ‘FX market’, ‘Currency market’, ‘Foreign exchange currency market’ or ‘Foreign currency market’, and it is the largest and most liquid market in the world with an average daily turnover of $3.98 trillion.

The FX market is open 24 hours a day, 5 days a week with the most important world trading centers being located in London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris, and Sydney.

It should be noted that there is no central marketplace for the Forex market; trading is instead said to be conducted ‘over the counter’; it’s not like stocks where there is a central marketplace with all orders processed like the NYSE. Forex is a product quoted by all the major banks, and not all banks will have the exact same price. Now, the broker platforms take all theses feeds from the different banks and the quotes we see from our broker are an approximate average of them. It’s the broker who is effectively transacting the trade and taking the other side of it…they ‘make the market’ for you. When you buy a currency pair…your broker is selling it to you, not ‘another trader’.

• A brief history of the Forex market

Ok, I admit, this part is going to be a little bit boring, but it’s important to have some basic background knowledge of the history of the Forex market so that you know a little bit about why it exists and how it got here. So here is the history of the Forex market in a nutshell:

In 1876, something called the gold exchange standard was implemented. Basically it said that all paper currency had to be backed by solid gold; the idea here was to stabilize world currencies by pegging them to the price of gold. It was a good idea in theory, but in reality it created boom-bust patterns which ultimately led to the demise of the gold standard.

The gold standard was dropped around the beginning of World War 2 as major European countries did not have enough gold to support all the currency they were printing to pay for large military projects. Although the gold standard was ultimately dropped, the precious metal never lost its spot as the ultimate form of monetary value.

The world then decided to have fixed exchange rates that resulted in the U.S. dollar being the primary reserve currency and that it would be the only currency backed by gold, this is known as the ‘Bretton Woods System’ and it happened in 1944 (I know you super excited to know that). In 1971 the U.S. declared that it would no longer exchange gold for U.S. dollars that were held in foreign reserves, this marked the end of the Bretton Woods System.

It was this break down of the Bretton Woods System that ultimately led to the mostly global acceptance of floating foreign exchange rates in 1976. This was effectively the “birth” of the current foreign currency exchange market, although it did not become widely electronically traded until about the mid 1990s.

(OK! Now let’s move on to some more entertaining topics!)…

What is Forex Trading?

Forex trading as it relates to retail traders (like you and I) is the speculation on the price of one currency against another. For example, if you think the euro is going to rise against the U.S. dollar, you can buy the EURUSD currency pair low and then (hopefully) sell it at a higher price to make a profit. Of course, if you buy the euro against the dollar (EURUSD), and the U.S. dollar strengthens, you will then be in a losing position. So, it’s important to be aware of the risk involved in trading Forex, and not only the reward.

• Why is the Forex market so popular?

Being a Forex trader offers the most amazing potential lifestyle of any profession in the world. It’s not easy to get there, but if you are determined and disciplined, you can make it happen. Here’s a quick list of skills you will need to reach your goals in the Forex market:

Ability – to take a loss without becoming emotional

Confidence – to believe in yourself and your trading strategy, and to have no fear

Dedication – to becoming the best Forex trader you can be

Discipline – to remain calm and unemotional in a realm of constant temptation (the market)

Flexibility – to trade changing market conditions successfully

Focus – to stay concentrated on your trading plan and to not stray off course

Logic – to look at the market from an objective and straight forward perspective

Organization – to forge and reinforce positive trading habits

Patience – to wait for only the highest-probability trading strategies according to your plan

Realism – to not think you are going to get rich quick and understand the reality of the market and trading

Savvy – to take advantage of your trading edge when it arises and be aware of what is happening in the market at all times

Self-control – to not over-trade and over-leverage your trading account

As traders, we can take advantage of the high leverage and volatility of the Forex market by learning and mastering and effective Forex trading strategy, building an effective trading plan around that strategy, and following it with ice-cold discipline. Money management is key here; leverage is a double-edged sword and can make you a lot of money fast or lose you a lot of money fast. The key to money management in Forex trading is to always know the exact dollar amount you have at risk before entering a trade and be TOTALLY OK with losing that amount of money, because any one trade could be a loser. More on money management later in the course.

• Who trades Forex and why?

Banks – The interbank market allows for both the majority of commercial Forex transactions and large amounts of speculative trading each day. Some large banks will trade billions of dollars, daily. Sometimes this trading is done on behalf of customers, however much is done by proprietary traders who are trading for the bank’s own account.

Companies – Companies need to use the foreign exchange market to pay for goods and services from foreign countries and also to sell goods or services in foreign countries. An important part of the daily Forex market activity comes from companies looking to exchange currency in order to transact in other countries.

Governments / Central banks – A country’s central bank can play an important role in the foreign exchange markets. They can cause an increase or decrease in the value of their nation’s currency by trying to control money supply, inflation, and (or) interest rates. They can use their substantial foreign exchange reserves to try and stabilize the market.

Hedge funds – Somewhere around 70 to 90% of all foreign exchange transactions are speculative in nature. This means, the person or institutions that bought or sold the currency has no plan of actually taking delivery of the currency; instead, the transaction was executed with sole intention of speculating on the price movement of that particular currency. Retail speculators (you and I) are small cheese compared to the big hedge funds that control and speculate with billions of dollars of equity each day in the currency markets.

Individuals – If you have ever traveled to a different country and exchanged your money into a different currency at the airport or bank, you have already participated in the foreign currency exchange market.

Investors – Investment firms who manage large portfolios for their clients use the FX market to facilitate transactions in foreign securities. For example, an investment manager controlling an international equity portfolio needs to use the Forex market to purchase and sell several currency pairs in order to pay for foreign securities they want to purchase.

Retail Forex traders – Finally, we come to retail Forex traders (you and I). The retail Forex trading industry is growing everyday with the advent of Forex trading platforms and their ease of accessibility on the internet. Retail Forex traders access the market indirectly either through a broker or a bank. There are two main types of retail Forex brokers that provide us with the ability to speculate on the currency market: brokers and dealers. Brokers work as an agent for the trader by trying to find the best price in the market and executing on behalf of the customer. For this, they charge a commission on top of the price obtained in the market. Dealers are also called market makers because they ‘make the market’ for the trader and act as the counter-party to their transactions, they quote a price they are willing to deal at and are compensated through the spread, which is the difference between the buy and sell price (more on this later).

Advantages of Trading the Forex Market:

• Forex is the largest market in the world, with daily volumes exceeding $3 trillion per day. This means dense liquidity which makes it easy to get in and out of positions.

• Trade whenever you want: There is no opening bell in the Forex market. You can enter or exit a trade whenever you want from Sunday around 5pm EST to Friday around 4pm EST.

• Ease of access: You can fund your trading account with as little as $250 at many retail brokers and begin trading the same day in some cases. Straight through order execution allows you to trade at the click of a mouse.

• Fewer currency pairs to focus on, instead of getting lost trying to analyze thousands of stocks

• Freedom to trade anywhere in the world with the only requirements being a laptop and internet connection.

• Commission-free trading with many retail market-makers and overall lower transaction costs than stocks and commodities.

• Volatility allows traders to profit in any market condition and provides for high-probability weekly trading opportunities. Also, there is no structural market bias like the long bias of the stock market, so traders have equal opportunity to profit in rising or falling markets.

While the forex market is clearly a great market to trade, I would note to all beginners that trading carries both the potential for reward and risk. Many people come into the markets thinking only about the reward and ignoring the risks involved, this is the fastest way to lose all of your trading account money. If you want to get started trading the FX market on the right track, it’s critical that you are aware of and accept the fact that you could lose on any given trade you take.

Jump To Next ChapterPart 2: Forex Trading Terminology

Jump Back To StartForex Trading Beginners University

Syllabus Of All Chapters

Part 1: What Is Forex Trading ? – A Definition & Introduction

Part 2: Forex Trading Terminology

Part 3: Long or Short ? Order Types And Calculating Profits & Losses

Part 4: What is Professional Forex Trading?

Part 5: What is Fundamental Analysis?

Part 6: What is Price Action Trading Analysis?

Part 7: Introduction to Forex Charting

Part 8: What Is A Forex Trading Strategy?

Part 9: Common Forex trading mistakes and traps

Part 10: What is Technical Analysis

Part 11: How to Make a Forex Trading Plan

Part 12: The Psychology of Forex Trading

Part 13: Professional Price Action Forex Trading Strategies

  1. Shoaib

    Do we buy and sell real currency in Forex trading or just Hypothetical currency?
    Can we withdraw the same currency, gold or oil etc. that we buy ?
    Answer please
    Thanks

    Reply
    • Nial Fuller

      No it’s a derivative of the underlying market, you can’t take physical delivery.

      Reply
  2. dan mario

    i really love this trade , but i need some guidlines before i start it

    Reply
  3. Joel Bendar

    Nial I already have started trading with a demo account and in two days I wiped out two demo accounts (about 8000.00 virtual money). I want to do this the intelligent way and I feel you can provide the educational background for me to be successful!

    Reply
  4. Saanjo

    Thank you 100%

    Reply
    • Okoroafor Onyekachi

      Thanks a lot for the insightful help.
      Really got lots of value here.

      Reply
  5. Wilbard

    How to start and with how much?

    Reply
  6. adesanya

    please i need to no more about this trading

    Reply
  7. LINDOKUHLE MJWARA

    HOW DO I START FOREX TRADING

    Reply
  8. Tshepiso

    I would like to join Forex trading

    Reply
  9. John

    Want to how can I start and with how much?

    Reply
  10. MARK KURA

    Thanks NF

    Reply
  11. Baysman

    Hi its very important lesson for
    Every body who wants to trade

    Reply
  12. Baysman

    The way you show us these instructions according to me its very interesting,
    So i need t to start it but i have to learn fast

    Reply
  13. Jonathan

    you real a good instructor for this platform, but i would read and understand all chapters,
    then will try demo account, hope this will work for me.
    congratulates mr N,F

    Reply
  14. Christian

    Am pleased with this info you have dropped here, please how do I start

    Reply
  15. Samuel

    Can brief me how to start trading online

    Reply
  16. Soe Than Oo

    I’m very interested reading your article on your website. But I’m no good in English. So I read to try your forex trading article.

    Thank you so much for your teaching how to trade in forex market.

    Reply
  17. oscar

    i wanna learn how forex working

    Reply
  18. onuoha favour divine

    i just wanna start trading,but i need some guildlines for trading

    Reply
  19. Tony

    I am very much interested in trading,especially after going through your notes. I want to learn more
    Tony
    Gauteng, South Africa

    Reply
  20. JANET wilkinson

    I want to learn how to trade.

    Reply
  21. priscilla

    I want to learn how to trade

    Reply
    • Lesedi

      Did you succeed?

      Reply
  22. Divine Ndlovu

    i just wanna start trading.But i wanna know how can i do it.I wanna start as soon as possible .Am based in south Africa

    Reply
  23. KathrynBrown Emukperuo

    Thanks Mr. Nial for the info, I am very much interested in Forex trading. Pls how do I start?

    Reply
  24. danai

    i want to know about forex trading

    Reply
  25. Thabiso Masia

    I like the fect that you have made it clear that there are risks involved and that one can lose money easily. Am going to join.

    Reply
  26. Lenerth Thekiso

    HI Nial m thinking this could be my thing if u can help understand better abt Forex I will truly appreciate it

    Reply
  27. Emilzzy James

    I am interested in forex trading

    Reply
  28. Lucky Gcina Kunene

    Thank you for the site, very informative

    Reply
  29. bernard mwaura

    pliz advice need to start trading

    Reply
  30. Tsieng

    How do i join?

    Reply
  31. lesedy

    im interested too in Forex trading Mr N.

    Reply
  32. kishor pravean

    hey ; iam soo ansious to join in it .so plz teach me to join in forex.

    Reply
  33. Nancy Kawira nyaga

    Am interested but I don’t have the whole info about forex trading

    Reply
  34. Manda Wessels

    hi Nial i am also interested in forex trading. please help me

    Reply
  35. Disemba Gumede

    so i think it all in the books for us beginers or there is an institution for treders

    Reply
  36. Sbongile Indy Maciko

    Hi Neil am also intrested in forex trading please help me out

    Reply
  37. Reuben Tlhagwane

    hy Nial…want to learn forex trading..can u take me step by step basics to top..

    Reply
  38. jane

    I really love forex.pls train me
    I don’t hv any knowledge of it

    Reply
  39. Saviour

    Am Interest Please, I Need A Mentor That Will Guide Me On How To Trade.

    Reply
  40. Onyemachi Samuel Ndusoro

    You are a great teacher.

    Reply
  41. Siphelele Mavundla

    hy Neil i wish to learn more about forex trading i jst need some more knowledge about it plz can u assist me.

    Reply
  42. Evans

    Help me join fx forex

    Reply
  43. Stha Dube

    Hy Neil …im so interested in Forex.want to learn mo and understand the whole system how it wrks and how to take a position in Forex

    Reply
  44. lucas nkosi

    i want a school of Forex market

    Reply
  45. Jene

    How do i start firex for starters?

    Reply
  46. Heldon Shisha Click

    I WANT TO LEARN HOW TO TRADE FOREX PLEASE TEACH ME

    Reply
  47. Adelaide

    Please teach me to start learning and know how to trade so I can start

    Reply
  48. Kenneth Lantang

    I am very to learn how to trade the market and thanks sir.

    Reply
  49. Dave

    Great forex knowledge, I was directed here by my big bro, a co-trader. It is indeed worth what he esteemed it.

    Reply
  50. Emanuel

    i wanna know how trade

    Reply
  51. Thomas

    Thank you

    Reply
  52. Kingsley ugochukwu

    Please I want to learn how to trade forex? How do I do it

    Reply
    • Thomas

      Read books

      Reply
  53. Sandra Baal

    I want to lean how to trade forex, pleae can you train me?

    Reply
  54. Mziyanda

    I would love to learn to trade

    Reply
  55. Victor Sobogun

    I want to lean how to trade forex, pleae can you train me?

    Reply
  56. Ephraim Monoto Ntswane

    I will like to know how to trade.

    Reply
  57. Celiwe Radebe

    I also want to learn how to trade

    Reply
  58. Bruce willoughby

    I am very interested

    Reply
  59. Timothy

    I want to learn how to trade

    Reply
  60. wilfred

    hello pls teach me to trade

    Reply
  61. Wilfred Pasag Costales

    hello i want to learn about forex

    Reply
  62. Matseliso mpasi

    Actually I like to learn how to trade

    Reply
  63. Gerald Segal
  64. Babatunde Sogunle

    hi, i want to start forex trading how realiable is it. can you give me more information please.

    Reply
  65. Jabulile

    I should like to learn how to trade

    Reply
  66. jav

    hi just want to say great website, good to see information out their that help the novice like me again great site keep it up!

    Reply
    • Johnson Ugochukwu

      Good afternoon Sir, I am a newbie interested in Forex Trading. Please take me by the hand and train me so that I become a successful trader.

      Reply
  67. agnnis bingamin

    Absolutely excellent article learn about forex trading.thanks..

    Reply

Leave a Comment

Your email address will not be published. Required fields are marked *