How to trade in Forex FX Trading steps

How to trade in Forex FX Trading steps.

Table of Contents
  1. FX Trading steps
    1. 1. Choose a currency pair
    2. 2. Decide on the type of FX trading 
    3. 3. Deciding to buy or sell 
    4. 4. Adding orders
    5. 5. Monitor and close your business.
    6. 6. Closing of your business.

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Unlike most financial markets, the OTC (over-the-counter) foreign exchange market has no physical or central location and operates 24 hours a day through a global network of companies, banks and individuals. This means that currency prices constantly fluctuate in value with each other, offering multiple trading opportunities.

In City Index, you can speculate on the future direction of currencies, taking a long or short position depending on whether you believe the value of the currency will rise or fall. The following video shows how to trade the EUR/USD currency pair with CFDs.

City Index Tutorial 4 - What is FX Trading

FX Trading steps

1. Choose a currency pair

Decide which currency pair you want to trade. With over 65 currency pairs to choose from, it is important to choose the right trading opportunity for you. 
City Index's technical and fundamental research tools can help you spot forex trading opportunities that suit your trading style. We recommend that you take the time to understand the amount of price volatility associated with the currency pair to help you manage your risk.

Pair of effects explained

2. Decide on the type of FX trading 

There are three ways to trade currencies with City Index Spread Betting, CFD or Forex Trading. Each has its own particular size of stake:

  • In the betting spread, pounds are exchanged for point movement.
  • In CFD trading, you trade a CFD amount in the unit of the base currency (currency on the left). For example, if you trade GBP / USD, your holding would be in pounds, while in USD / JPY your holding would be in US dollars.
  • In exchange operations, you buy lots, in the unit of the base currency (currency on the left).
  • For example, if you trade GBP / USD, your stake would be in Pounds, while in USD / JPY your stake would be in US Dollars (minimum stake size is 1000).

FX exchange rates

3. Deciding to buy or sell 

Once you have chosen a market, you need to know the current price at which you are trading, which you can do by submitting an order ticket on the platform. All currencies are quoted in terms of one currency against another. Each currency pair has a 'base' currency and a 'quote' currency. The base currency is the currency to the left of the currency pair and the quote currency is to the right. Simply put, when trading foreign currencies, you should:

BUY a currency pair if you believe that the base currency will strengthen against the quote currency, or the quote currency will weaken against the base currency. 

Your profits will increase in line with each increase in the exchange price.

Each drop in the exchange price below its opening level will result in a loss.

FOR SALE a currency pair if you believe that the base currency will weaken in value against the quote currency, or the quote currency will strengthen against the base currency.

Your profits will increase in line with each point by which the price of the exchange rate falls.

Each increase in the exchange rate above its opening level will result in a loss.

Spread - FX pairs have two prices. 
The first price is the selling price (known as the bid) and the second price is the buying price (also known as the offer). The difference between the bid price and the ask price is known as the margin, and is basically the cost of the trade. 

Explanation of FX explained

4. Adding orders

An order is an instruction to automatically trade at a point in the future when prices reach a specific level predetermined by you. You can use stop and limit orders to ensure that you retain any profit and minimize your risk when your respective profit or loss risk targets are reached.

While not mandatory, given the volatility in the foreign exchange markets, it is essential to use and understand risk management tools such as stop-loss orders.

A stop-loss order is an instruction to close a transaction at a price worse than the current market level and, as the name implies, is used to help minimize losses. There are two types of stop loss orders: standard and guaranteed. 

Stop and limit orders

standard stop loss order Once activated, it closes the transaction at the best available price. Therefore, there is a risk that the closing price will be different from the order level if market prices soar. 

guaranteed stop loss however, for which a small premium is charged on the trigger, guarantees to close your trade at the stop loss level you have determined, regardless of any market spacing.

A limit order is an instruction to close a transaction at a price better than the current market level and is used to help set price targets.

Standard stop losses and limit orders can be placed free of charge and can be implemented in the trade ticket when you make your first trade, and you can also attach orders to existing open positions. 

Learn more about risk management here .

5. Monitor and close your business.

Once opened, the profit and loss of your trade will now fluctuate with every movement in the market price. 

You can track market prices, view your unrealized profit/loss update in real time, attach orders to open positions and add new trades or close existing trades from your computer or app on your smartphone and tablet. 

6. Closing of your business.

When you are ready to close your trade, you simply do the opposite of the opening trade. Assuming you bought 3 CFDs to open, you would sell 3 CFDs to close. When you close the trade, your net open profit and loss will be realized and immediately reflected in your account cash balance. 

Please note that City Index's CIF accounts and CFD accounts are FIFO. For get more For more information, please visit our help and support section.

 

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