Forex trading for beginners – learn to trade Forex – tutorial

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This is a forex trading guide for beginners. I try to answer all questions about Forex trading. If you are new to trading or you traded stocks and want to learn more about Forex trading, then this guide is for you.

The goal of this guide is to give you practice knowledge so you can understand Forex trading basics and trade by yourself. If you don’t understand some term, go to sites like Investopedia, they covered all terms like margin, pip and many others.

How to understand forex trading

When you trade stocks, you can select how many stocks you want to buy or sell (if you plan to go short). With Forex you are trading a currency. You can’t select that you want to sell 7523 euros. Starting point is 1 lot which is 100,000 units of base currency.

  • 1 lot for EUR/USD = 100,000 euros
  • 2 lots for EUR/USD = 200,000 euros
  • 0.1 lot for EUR/USD = 10,000 euros

That way you can decide how much base currency you want to invest.

Of course, you do not have to have all that money in your account. Thanks to leverage you have only split of that amount.
In Forex, minimal movement is one pip. For standard basic 1 lot (100,000 units) move of 1 pip is equal to 10$ change.

Why people are losing money in Forex

It is because they do not understand leverage. It is very powerful, yet very dangerous perk that you get when you decide to trade Forex.

With only few hundred dollars you can open positions which are as big as 100,000
dollars or euros and larger. When you are right in your trade, then you make good money. When you are wrong… well, you can be out of funds very soon.

That is why new traders should start from lower sizes – micro lots or even nano lots. This is similar to stock market. It is a bad idea to start investing in stock market and learn how to invest with real 100,000 or 500,000$. The risk is too big. It is easier to learn on smaller capital. Same is with Forex.

Start small – Nano, micro lots

You won’t get rich fast by trading micro and nano lots, but thanks to them you will stay in the game and you will have opportunity to learn from live trading. The reason why so many traders lose all their money in the Forex is because:

  • their trading capital is too small
  • they open too big positions, because they do not understand leverage

So yeah, it is like in many ads you could see in the past – “you can open account with just 100$. Leverage even 1:500”. In the end, you need one or few positions of 1 lot size to blow up your account.

You should remember that 1 lot is a base for calculating size of your position.

1 lot = 100,000 units of a currency

In MetaTrader4 it will be on select list like:

forex lot sizes in Metatrader

If you open short on EUR/USD of size 2 lots you will be shorting 200,000 euros. One pip will be around 20$. Magic of leverage (and the curse same time).

There are also smaller base sizes like:

1 mini lot (0.1) = 10,000 units of base currency

If you open long position on EUR/USD of size 0.1 then you will be long with 10.000 euro.

In MetaTrader4 it will be as Volume list like:

  • 0.1 (one mini lot)
  • 0.2 (two mini lots)
  • 0.3 …

One pip will be here around 1 euro.

1 micro lot (0.01) = 1000 units of base currency

In MetaTrader4 it will be as Volume list like:

  • 0.01 (one micro lot)
  • 0.02 (two micro lots)
  • 0.03 (three micro lots)

Going long with 0.01 lot on EUR/USD means that you are long 1000 euros. One pip is here around 0.1 euro.

1 nano lot (0.001) = 100 units of base currency

In MetaTrader4 it will be on select list like:

  • 0.001 (one nano lot)
  • 0.002 (two nano lots)

Not every broker offer trade sizes as small as nano lots or micro lots. You should check it first in the offer.

Trading sizes are simple. First you may get confused, because it is different than trade sizes in stock trading. Try to do some operations on demo account, try different position sizes and you will understand quickly what it is all about with nano, micro, mini and full lots.

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