Forex trading guide for beginners and professionals

Forex trading guide for beginners and professionals

The participation of individuals investors in foreign exchange (forex  💷 💶 💴 💵) markets has substantially increased in the past few years. If you are an investor considering participating in this market, you need to understand the market and some of its unique features. So, whether you are a beginner or a professional investor, in this article we will explain the fundamentals of forex trading and how to invest in this market 💹.

What you will learn ahead 🎓

  • What is a forex and how does it work?
  • What are forex trading rates?
  • How can I trade forex?
  • How are forex pairs quoted and priced?
  • How do I calculate profits and losses in forex?
  • How much money do I need to trade forex?
  • What is leverage in forex trading?
  • The best way to trade forex
  • Is forex worth it?
  • How to trade forex with AI

🎯  Our mission is to help you understand how to invest efficiently and improve your outcomes. Get extra trading insights from leading finance experts on the trading Academy and on our free forex Telegram channel.

Forex is a risky investment and might cause a loss of capital. Before you start trading forex, you should consider whether it is suitable for you.

📚 Our articles are written by real finance experts with hands-on investment experience to make financial education available to everyone.

What is Forex and how does it work?

With an average daily volume of 6 trillion dollars, forex is the largest and most liquid financial market in the world, operating 24 hours a day, 5 days a week, in the great majority of countries. Differently from the traditional markets, in forex, there is no central trading exchange and most of the trading operations are conducted through electronic trading networks between banks, brokerages, institutional and retail investors.

The primary market for currencies is the “interbank market” where banks 🏦, insurance companies, large corporations, and other large financial institutions manage the risks associated with fluctuations in currency rates (forex pairs). The true interbank market is only available to institutions that trade in large quantities and have a very high net worth.

Secondly, there is the over the counter market (OTC) or off-exchange market, which permits retail investors to participate in forex trading. Here is where individuals can trade forex through forex brokers for just $100.

Nowadays, there is a wide variety of forex brokers, which offer attractive offers for traders around the world to invest in forex. From deposit bonuses to leverage and trading indicators, forex brokers have provided increasingly attractive ways to open a trading account and get started in the forex market.

We have listed the best forex brokers in this article. Click here to check it out.

Here, we list some of the most common features of forex trading  ✅:

  • Forex sessions are 24/5 from Sunday at 5:00 pm Eastern (ET) through Friday 5:00 pm.
  • With an average daily volume of $6 trillion, forex is the largest and most liquid financial market in the world.
  • Due to the large volume, forex offers great opportunities to invest.
  • Due to a wide variety of existing Forex brokers, Forex has become increasingly affordable.
  • You can start trading forex from just $100 or with a risk-free practice account with a lot of forex brokers.
  • It’s possible to invest automatically in forex with AI trading.
  • Portfolio diversification. Forex is used as a hedging instrument by large hedge funds. This means that you can also consider forex trading as a protection for your investment portfolio.

💡 So, are you thinking about investing? Think of forex as part of your capital allocation. With Wiseinvest’s AI trading, you can invest automatically in forex from just $100.

What are forex trading rates?

Foreign currency exchange rates are what it costs to exchange one country’s currency for another country’s currency. For example, if you go to England on vacation, you will have to pay for your hotel, meals, admissions fees, souvenirs, and other expenses in British pounds. Since your money is all in US dollars (USD 💵), you will have to use (sell) some of your dollars to buy British pounds.

Assume you go to your bank before you leave and buy $1,000 worth of 💷 British pounds (GBP). If you get 565.83 British pounds (£565.83) for your $1,000, each dollar is worth 0.56583 British pounds. This is the exchange rate for converting dollars to pounds (GBP/USD). If £565.83 isn’t enough cash for your trip, you will have to exchange more US dollars for pounds while in England.

Assume you buy another $1,000 worth of British pounds from a bank in England 🏦 and get only £557.02 for your $1,000. The exchange rate for converting dollars to pounds has dropped from 0.56583 to 0.55702. This means that US dollars (USD) are worthless compared to the British pound (GBP) than they were before you left on vacation.

Assume that you have £100 left when you return home. You go to your bank and use the pounds to buy US dollars (USD). If the bank gives you $179.31, each British pound is worth 1.7931 dollars. This is the exchange rate for converting pounds to dollars.

Theoretically, you can convert the exchange rate for buying a currency to the exchange rate for selling a currency, and vice versa, by dividing 1 by the known rate. For example, if the exchange rate for buying British pounds with US dollars (💷💵 GBP/USD ) is 0.56011, the exchange rate for buying US dollars with British pounds is 1.78536 (1 ÷ 0.56011 = 1.78536).

Similarly, if the exchange rate for buying US dollars with British pounds is 1.78536, the exchange rate for buying British pounds with US dollars (GBP/USD) is 0.56011 (1 ÷ 1.78536 = 0.56011). This is how newspapers often report currency exchange rates.

As a practical matter, however, you will not be able to buy and sell the currency at the same price, and you will not receive the price quoted in the newspaper 📰. This is because banks and other market participants make money by selling the currency to customers for more than they paid to buy it and by buying the currency from customers for less than they will receive when they sell it. The difference is called a spread and is discussed later in this article.

How can I trade forex? 💹

As you can see from the London vacation example, currency exchange rates fluctuate. As the value of one currency rises or falls relative to another, traders decide to buy or sell currencies to make profits. Retail investors also participate in the forex market, generally as speculators who are hoping to profit from changes in currency rates (forex pairs).

There are two main different ways to trade forex 📈📉 :

1. In the off-exchange, also called the over-the-counter (OTC) market.

A retail investor trades directly with a counter-party through forex brokers and there is no exchange or central clearing house to support the transaction.

Click here to see some of the best forex brokers to trade in 2020.

2. In the on-exchange market.

For example, in the USA, the Chicago Mercantile Exchange (CME) offers currency futures and options on futures products. Exchange-traded currency futures and options provide their users with a liquid, secondary market for contracts with a set unit size, fixed expiration date, and centralized clearing.

When considering to trade forex, you should look for regulated forex brokers. Some examples of forex regulators are SEC (USA), FCA (UK), ASIC (Australia), MAS (Singapore), FSCA (South Africa).

How are forex pairs quoted and priced? 🔬

Currencies are designated by three-letter symbols. The standard symbols for some of the most commonly traded currencies (forex pairs) are:

USD – United States dollar 🇺🇸
EUR – Euro 🇪🇺
CAD – Canadian dollar 🇨🇦
GBP – British pound 🇬🇧
JPY – Japanese yen 🇯🇵
AUD – Australian dollar 🇦🇺
CHF – Swiss franc 🇨🇭

Forex transactions are quoted in pairs because you are buying in gone currency while selling another. The first currency is the base currency and the second currency is the quote currency. The price, or rate, that is quote dis the amount of the second currency required to purchase one unit of the first currency. For example, if EUR/USD 🇪🇺🇺🇸 has an ask price of 1.1178, you can buy one Euro for 1.1178 US dollars (USD).

Forex pairs are often quoted as bid-ask spreads. The first part of the quote is the amount of the quote currency you will receive in exchange for one unit of the base currency (the bid price) and the second part of the quote is the amount of the quote currency you must spend for one unit of the base currency (the ask or offer price). In other words, a EUR/USD spread of 1.1170/1.1178 means that you can sell one Euro for $1.1170 and buy one Euro for $1.1178. A forex broker may not quote the full exchange rate for both sides of the spread.

For example, the EUR/USD spread discussed above could be quoted as 1.1170/78. The customer should understand that the first three numbers are the same for both sides of the spread.

What transaction costs will I pay in the forex?

Although forex broker who is regulated must disclose their charges to retail investors, there are no rules about how a dealer charges a customer for the services the dealer provides or that limit how much the broker can charge.

Before opening an account, you should check with several forex brokers and compare their charges as well as their services. If you were solicited by or place your trades through someone other than the broker, or if your account is managed by someone, you may be charged a separate amount for the third party’s services. Some brokers charge a per-trade commission, while other firms charge a mark-up by widening the spread between the bid and ask prices (spreads) they give their customers.

In the earlier example, assume that the dealer can get a EUR/USD spread of 1.1173/75 from a bank. If the broker widens the spread to 1.1170/78 for its customers, the dealer has marked up the spread by 0.0003 on each side.

Some forex brokers may charge both a commission and a mark-up. Brokers may also charge a different mark-up for buying the base currency than for selling it.

How do I close out trade-in forex?

Retail forex transactions are normally closed out by entering into an equal but opposite transaction with the broker. For example, if you bought Euros with U.S. dollars (EUR/USD) you would close out the trade by selling Euros for U.S. dollars (USD). This is also called an offsetting or liquidating transaction.

Most retail forex transactions have a settlement date when the currencies (forex pairs) are due to be delivered. If you want to keep your position open beyond the settlement date, you must roll the position over to the next settlement date. Some brokers roll open positions over automatically, while other dealers may require you to request the rollover. On most open positions, interest is earned on the long currency and paid on the short currency every time the position is rolled over.

The interest that is earned or paid is usually the target interest rate set by the central bank of the country that issued the currency. If the interest rates of the two countries are different, then there is usually an interest rate differential which will result in a net earning or payment of interest. This net interest is often called the rollover rate. It is calculated and either added or deducted from the trader’s account at the rollover time of each trading day that the position is open.

⚠️ You should check your agreement with the dealer to see what, if anything, you must do to roll a position over and what fees you will pay for the rollover.

How do I calculate profits and losses in forex? 💰

When you close out a trade, you can calculate your profits and losses using the following formula:

(Price when selling the base currency) – (Price when buying the base currency) x (transaction size) = Profit or Loss

Assume you buy Euros with U.S. Dollars (EUR/USD) at 1.1178 and sell Euros at 1.1188. If the transaction size is 100,000 Euros, you will have a $100 profit.

($1.1188 – $1.1178) x 100,000 = $0 .001 x 100,000 = $100

Similarly, if you sell EUR/USD at 1.1170 and buy Euros at 1.1180, you will have a $100 loss.

($1.1170 – $1.1180) x 100,000 = -$0.001 X 100,000 = -$100

You can also calculate your unrealized profits and losses on open positions. Just substitute the current bid or ask rate for the action you will take when closing out the position.

For example, if you bought EUR/USD at 1.1178 and the current bid rate is 1.1173, you have an unrealized loss of $50.

($1.2173 – $1.2178) x 100,000 = -$0.0005 x 100,000 = -$50

Similarly, if you sell EUR/USD at 1.1170 and the current ask rate is 1.1165, you have an unrealized profit of $50.

($1.1170 – $1.1165) x 100,000 = $ 0.0005 x 100,000 = $50

If the quote currency is not in US dollars (USD), you will have to convert the profit or loss to US dollars at the dealer’s rate. Further, if the forex broker charges commissions or other fees, you must subtract those commissions and fees from your profits and add them to your losses to determine your true profits and losses.

How much money do I need to trade forex? 💹

Forex brokers can set their own minimum account sizes, and it ranges from $100 up to $10,000 initial deposits. So you will have to check on the forex broker website how much money you must put up to begin trading.

Most brokers will also require you to have a certain amount of money in your account for each transaction. This security deposit, sometimes called margin, is a percentage of the transaction value and may be different for different currencies.

A security deposit acts as a performance bond and is not a down payment or partial payment for the transaction.

Brokers are usually asked by regulators to calculate and collect security deposits that equal or exceed the percentage set by their rules. Although the percentage of the security deposit remains constant, the dollar amount of the security deposit will change with changes in the value of the currency being traded.

The formula for calculating the security deposit is:

The current price of base currency x Transaction size x Security deposit % = Security deposit requirement given in quote currency.

Returning to our EUR/USD example with an initial price of $1.1178 for each Euro and a transaction size of 100,000 Euros, a 2% security deposit would be $2,435.60

$1.2178 X 100,000 x 0.02= $2,435.60

What is leverage in forex trading?

Security deposits allow customers to control transactions with a value many times larger than the funds in their accounts. This is called leverage. In this example, $2,435.60 would control $121,780 worth of Euros.

Value of Euros (EUR) = $1.2178 x 100,000 = $121,780

This ability to control a large amount of one currency, in this case, the Euro, using a tiny percentage of its value, is called leverage or gearing. In our example, the leverage is 50:1 because the security deposit controls Euros worth 50 times the amount of the deposit.

The higher the leverage, the more likely you are to lose your entire investment if exchange rates go down when you expect them to go up (or go up when you expect them to go down).

Leverage of 50:1 means that you will lose your initial investment when the currency loses (or gains) 2% of its value, and you will lose more than your initial investment if the currency loses (or gains) more than 2% of its value. If you want to keep the position open, you may have to deposit additional funds to maintain a 2% security deposit.

Forex brokers may not guarantee that you will not lose more than you invest, which includes both the initial deposit and any subsequent deposits to keep the position open.

💡 Would you like to learn more about leverage in forex trading? Read this article by clicking here.

Dangers of using leverage in trading ⚠️

Leverage is commonly pointed to as a double-edged sword. If the price moves in an unfavorable direction, high leverage can produce large losses concerning your initial deposit. In fact, even a small move against your position may result in a large loss, including the loss of your entire deposit. Depending on your agreement with your dealer, you may also be required to pay additional losses.

The best way to trade forex 🏆

Wiseinvest’s AI investment solution is the result of years of research and development by specialists in Artificial Intelligence, Finance, and Mathematics, who combined their skills specifically to design the best tools for helping traders invest automated or manually with AI forex signals in the forex market, regardless the experience level.

Why you should consider investing in forex with Wiseinvest’s AI trading 

  • Portfolio diversification in forex.
  • 3 times the average returns of S&P500*.
  • You can try our AI for free and with practice accounts.
  • It is efficient and totally hands-free.
  • Invest from anywhere in the world, from just $100.
  • Very simple and quick setup.
  • It is safe and affordable.
  • Integrated with the best brokers.
  • There are no management and performance fees.
  • There is a team of specialists to support you.
  • Learn finance with real leading experts.

Our average annual return over the past 10 years (2011 – 2020) was +43%. You can check our real-time track record by clicking here.

Is forex trading worth it? 🤔

An important point to be resolved when planning to become a trader is to decide where to invest. There are several financial instruments to consider, such as StocksForex, Bonds, Treasury bills, Savings account, real estate, and so on.

Forex is the short way of saying “Foreign Exchange“. This means the global market for trading international currencies, also known as the FX market through a forex broker. These are the key features of forex:

  • Forex sessions are 24/5 from Sunday at 5:00 pm Eastern (ET) through Friday 5:00 pm.
  • With an average daily volume of $6 trillion, forex is the largest and most liquid financial market in the world.
  • The large volume of forex offers great opportunities to invest.
  • Due to a wide variety of existing Forex brokers, Forex has become increasingly affordable.
  • You can start trading forex from just $100 or with a risk-free practice account with a lot of forex brokers.
  • It’s possible to invest automatically in forex with AI trading.

How to trade forex with AI

Whether you are a beginner or a professional trader, you can automatically invest in AI forex. See how it works.

automated trading with ai bot

By trading forex automated with AI, you will save time and improve your performance without monitoring the market and managing trading platforms.

With Automated AI trading you do not need MT4 / MT5 and other trading platforms to invest in forex. All forex trades are automatically placed into your broker account every time that our AI system identifies a new worthy trading opportunity. You can monitor the AI trading performance in real-time directly on our dashboard.

Benefits of Automated AI trading  🏆

  • Invest in forex from just $100.
  • It is automatic, time-saving, and safe.
  • An annualized average return of +42%* over the past 10 years.
  • Setup in 3 minutes.
  • Totally hands-free, from anywhere.
  • Integrated with the forex best brokers.
  • Your capital is protected by the brokers.
  • Test with a risk-free practice account.
  • Up to 60 trades per month.
  • Automatic trades on average every 12 hours.
  • You have full control of your broker account.
  • Fast execution of trades.
  • No commissions, no management fees.
  • Automatic risk-management with low trading exposure of your capital (0.10% up to 0.65% per trade).
  • No MT4/MT5 or other platforms required.
  • Portfolio with 40 different automatic strategies.
  • Trading results directly on our dashboard.
  • Optional free forex signals.
  • Trading alerts by email and Telegram.
  • We have a team of professionals to support you.

Don’t you have a broker account yet? Our AI is integrated to trade automated with the broker FXCMClick here to open an account with FXCM.

What does happen after linking a broker account with AI trading?

  • The AI will automatically invest on average every 12 hours in your account.
  • There will be up to 60 trades per month (Monday – Friday).
  • You can enable and disable AI whenever you want.
  • Check your trades on our dashboard or the brokerage.
  • You can link more than one broker at the same time.
  • You don’t need MT4 / MT5. It’s all on our dashboard.
  • Your capital is protected under the broker.
  • Your personal data is protected by us.

Would you like to try our automated AI trading for free in a risk-free demo account? Get started free here.

How much do I need to trade forex with AI?

You can start in forex trading with free AI forex signals or AI trading from just $100 through some of the best forex brokers. It is moreover possible to test using a risk-free demo account with our AI trading structure. Regardless, to do a capable peril, the board in authentic records, we suggest you start from at least $100.

What is the best forex broker to use AI trading?

To define which forex broker you should choose for using our automated AI trading, it is important to consider the following aspects.
  • Where are you from? FXCM does not accept accounts from The US, but on the other hand, FXCM accepts accounts from some other countries.
  • How much do you have? With FXCM is ideal if you start at least $100.
  • FXCM sometimes provides higher liquidity volume and lower spreads, which are vital aspects of the success in forex trading. But it can also vary.
If you are considering trading with our manual AI forex signals, we would like to suggest XTB, which is one of the best forex brokers in Europe.

Why trust Wiseinvest instead of other trading platforms

These are the main reasons why forex traders at all levels trust us, rather than other trading solutions.

  • Our automated AI trading is efficient, simple, safe, and affordable. You do not need MT4 or other complicated platforms to trade forex.
  • We are a legitimate and reliable company with extensive experience in finance. We combine 19 years of trading experience and extensive academic research in the financial markets.
  • Our AI outperformed the investment market with an average annual return of 43% over the past 10 years (2011-2020).
  • The automated AI trading works with some of the best forex brokers.
  • When using our AI solutions, all your money is protected by brokerage firms.
  • We do not have access to withdrawals from our customers’ accounts.
  • All of your data is encrypted and will never be shared.

The Risks of Forex Trading

If you are considering participating in forex trading, you should understand some of the risks associated.

The market can move against you.

No one can predict with certainty which way exchange rates will go, and the forex market is volatile. Fluctuations in the foreign exchange rate between the time you place the trade and the time you close it out will affect the price of your forex contract and the potential profit and losses relating to it.

Plus, as discussed earlier, a relatively small amount of money can enable you to hold a forex position worth many times the account value. This is referred to as leverage or gearing. The smaller the deposit about the underlying value of the contract, the greater the leverage.

Be wary of scammers.

As with any investment, you must protect yourself against fraud. Watch out for investment schemes that promise huge returns with little risk. You must carefully observe the investment offer itself and continue to monitor any investment you make. Scammers are out there promising money overnight with high payouts.

Takeaways 🎓

  • With an average daily volume of $6 trillion, forex is the largest and most liquid financial market in the world and offers great opportunities to invest.
  • Forex sessions are 24/5 from Sunday at 5:00 pm Eastern (ET) through Friday 5:00 pm.
  • Due to a wide variety of existing Forex brokers, Forex trading has become increasingly affordable.
  • Wiseinvest provides the best AI trading solutions for forex. You can trade automated from just $100 through partner brokers with AI trading or manually with AI forex signals in the forex broker of your choice.
  • You can invest in forex with automated AI trading or AI forex signals for free.
🎯 We are engaged in democratizing the retail forex trading market through AI solutions. We work hard to provide financial education, allow anyone in the world to invest easily with Automated AI trading and free AI forex signals. Our AI platform is integrated with AWS, IBM Watson, and Google AI.

Disclaimer: Forex and Contracts for Difference (CFDs) are complex instruments and come with a high risk of losing money due to leverage. Forex trading is not suitable for everyone. You should consider whether you understand how forex and CFDs work and whether you can afford to take the high risk of losing your money.

The forex brokerages displayed shall disclaim the overall performance of traders in their platforms. Oanda warns that 76.8% of retail forex traders lose money trading CFDs. XTB warns that 80% of retail forex traders lose money trading CFDs. FXCM warns that 74.74% of retail forex traders lose money trading CFDs.

The performances aforementioned are not related to Wiseinvest AI forex trading and AI forex signals system. You can check the performance of our AI forex system on our dashboard.

Wiseinvest does not recommend binary options trading and any of the binary brokers described in this article.