How to trade Forex?

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Forex Trader

Hi this is Henry, today we are going to talk about how to trade Forex.

Unless you have millions of dollars or work for a bank’s Foreign Exchange department, chances are that you are a retail Forex trader, and in order to trade in the Forex market, you’re going to need to open an account with a Forex broker or FCM, Futures Commission Merchant.

Forex Broker

Before we get too attached to these acronyms, Forex broker is the common term and if you search it on google, you’ll find plenty of them…

Forex Market moves in pips

The next logical question is, why do we need to use a broker? Here’s why… Because the Foreign Exchange market moves in PIPs, or the smallest price change for a currency pair (Percentage Index Point, or 100th of 1%), which is usually the 4th decimal on most pairs or 2nd decimal on Japanese Yen Pairs … (Ok, Don’t worry about it, I’ll explain PIP and Currency Pair in the future).

USD CAD Exchange

For example,

If USD/CAD’s current rate is 0.9780, or for each USD, you get $0.9780 of a Canadian dollar.

Now if the market moves to 0.9790, or 10 pips, if you exchanged $100 USD, you would have made 10 cents.

USD $10,000 to CAD Exchange

If you exchanged $1000 USD, then you would have made a whopping $1.00

If you really were adventurous and exchanged $10,000, you would have made $10

Forex Trading Return

And to make a worthwhile return, you would have to exchange $100,000 to make $100 from this one trade…

Forex Brokers Leverage 50:1

Because most retail traders don’t have $100,000 to invest in order to make $100, brokers provide leverage, which is 50:1 in the U.S. and up to 500:1 outside of US, enabling retail traders to participate in the Foreign Exchange market.

Forex Trading Potential Return

So if you use a broker that gives you 50:1 leverage, or for every dollar you invest, your broker let’s you access $50 worth of trades, so you only need to put down $2000 to trade $100,000 contract, and if USDCAD moves 10 points, you would have made $100, or 5% return on your $2000… With the market moving anywhere from 30 to 200 points a day, you can see that the potential of return is extremely high…

Need a Forex Broker to trade in the Forex Market

To recap, to trade in the Forex market you’ll need to find a Forex broker, which provides leverage and access to the Forex market.

Why should you trade Forex

If you like this tutorial, please watch the video and leave your comments below and don’t forget to check out our other videos on the Forex Basics series.

About Henry Liu

My name is Henry Liu and I am a Forex Trader and Mentor. I help traders achieve consistent income trading Forex while spending less time trading. My focus in trading is a combination of Fundamental Analysis, Technical Analysis, and Market Sentiment. Far too many retail Forex traders concentrate on just one aspect of trading, technical analysis, and ignore everything else; it is my goal (and vision) to educate every trader on how to take advantage of news trading and become more balanced traders.

You can find more information about me on my Google Profile.

Comments

  1. Good!

  2. Fortunes says:

    I want to go into forex trading, what are the criteria and how much can I use as a start-up

  3. Good morning Henry,
    I hope your weekend is going well.
    Great work with the videos! Well done, nice graphics, sound education.
    Thank you
    Respectfully
    Peter

  4. Vijay Ganpatye says:

    Hi

    I am a forex trader, I need a confirmed trendline strategy… accuratley trendline trading…
    can u help me??

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