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LESSON 1
Introduction to the Forex market

"Experience keeps a dear school, but fools will learn in no other."

Benjamin Franklin

 

Learn about foreign exchange. Examine all chapters of this free forex trading course, then go through online tests and check your knowledge. This foreign exchange course contains the most important information that makes the market transparent for any beginner.


You will definitely not achieve good results if you think of Forex as an easy way to earn some money. Trading is a serious tough work and requires permanent learning. Remember this basic statement, which must be learnt by any new trader. Move step by step with our Forex online course, develop the skill of trading and you will gain a success.

International exchange market (Currency exchange) — is the exchange, where operations on purchase and sale of currency take place between participants of the Forex market;


Forex pip (point) – is the minimum change of price of currency rate


 Currency operations – contracts of participants of currency market on purchase and sale and settlement, conversion operations etc.;


Currency rate (currency quote) — the price of currency unit of one country expressed in currency unit of another country.


Types of Forex quotes:

Direct quote – shows the amount of US dollars contained in national currency unit;

Indirect quote – shows the amount of national currency contained in one US dollar;

Cross rate – currency units of one country expressed in currency units of another country;

Major currencies

EUR – United European currency

USD – US dollar

GBP – British pound of sterling

CHF – Swiss Frank

JPY – Japanese Yen

Other currencies

AUD – Australian Dollar

NZD – New Zealand Dollar

CAD – Canadian Dollar 


Currency pair is the name of text symbols of currency.


For example, EUR/USD = 1.2880

where:

EUR – is the base currency (traded currency)

USD – quoted currency


Base currency (traded) is always put the left.


Quoted currency is always the second 

Main currencies traded on the market 

 

EUR/USD – European currency to US dollar

GBP/USD – British pound of sterling to US dollar

USD/JPY - US dollar to Swiss Frank 

EUR/CHF – European currency to Swiss Frank 

USD/CHF - US dollar to Swiss Frank 

GBP/JPY - British pound of sterling to Japanese Yen 

GBP/CHF - British pound of sterling to Swiss Frank 

EUR/GBP - European currency to British pound of sterling 

EUR/JPY - European currency to Japanese Yen 

AUS/USD - Australian Dollar to US dollar

USD/CAD - US dollar to Canadian Dollar


All speculations made by a trader are always conducted with base currency. Thus, buying EUR/USD, you buy Euro for US dollars.


Spread – is the difference between price of purchase (Ask) and price of sale (Bid)


Cost of one point depends on volume of your trade and is equal:

Volume of trade multiplied into minimum change of price = cost of point

Open position – is the trade for purchase/sale, which is not closed and is present on market.

Credit leverage – is the relation of borrowed capital to trader's own funds.

For example, Forex broker provides trader with credit leverage 1:100, thus, trader can make a trade with volume 100 times more than his deposit.

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