Beginner Trader - We often see the lure of getting rich quick from forex trading, but unfortunately not many of them provide a basic understanding of what FX trading is in detail, starting from its characteristics, the advantages of forex trading or trading risks.

This time we will discuss more about what FX trading is, which beginner traders must know.

Beginner Traders Must Know: What is Forex (FX)?

The basic understanding of forex trading or foreign exchange is the trading of foreign currencies that has the aim of making a profit. An example of this forex trading is, when buying on the EUR/USD pair, it means that you are making a purchase on the EURO currency and at the same time you are also selling the USD currency.

There may be some of you (especially novice traders) who think that FX trading is an activity related to exchanging foreign currencies at a money changer. Actually this is not wrong, but this is a conventional way by using the services of a money changer or doing it directly at the bank.

Forex trading here means the activity of buying and selling foreign currencies in the interbank market online to gain a profit. This FX trading is not an activity to gain profit alone like a business and investment, but can also be a profession like professional workers.

Foreign exchange trading on an international scale is not only done by individuals, but involves many parties such as central banks, multinational companies and there are also individuals who have large assets such as George Soros. They all gather in a market that we call the forex market.

Beginner Traders Must Know: The Difference Between Forex and Stock Trading

Although both are part of the financial market, forex and stocks are two different trades. FX trades currencies where in its trade it uses leverage so that it can minimize capital with a greater value.

While stocks trade stocks with larger capital than forex trading. In addition, stocks have limited stock market opening hours according to the stock exchange working hours Monday - Friday which are divided into two sessions. While in FX trading the market is fully open for 24 hours starting from Monday-Friday.

Beginner Traders Must Know: Currencies in the Forex Market

In fact, there are quite a lot of currencies traded in the FX market, but there are 8 major currencies that are widely traded and are the currencies that drive the economy throughout the world.

• USD: Dollar, from the United States
• EUR: Euro, used in European Continent countries
• JPY: Yen, from Japan
• GBP: Pound, from England
• CHF: Franc, from Switzerland
• CAD: Dollar, from Canada
• AUD: Dollar, from Australia
• NZD: Dollar, from New Zealand

The currency symbol consists of 3 letters, where the first 2 letters are the abbreviation of the country and the third letter is the abbreviation of the currency used by the country.

• JP = Japan, Y = Yen
• AU = Australia, D = Dollar
• GB = Great Britain (Inggris), P = Poundsterling

Contract Size and Leverage

Contract size or contract value is a standard contract used if we want to make regular transactions, which is 100,000 currency units. While leverage can be interpreted as a loan fund given by a broker to a trader, so that traders can have greater purchasing power.

The relationship between the two is that using leverage makes it easier for traders to make transactions worth the contract size.

Example: Buy 1 lot in EURO currency, the leverage used is 1:500

Margin = Leverage x Contract Size

= (1:500) x 100,000

= 0,02 x 100,000

= 200

So to make a transaction worth 100,000 EURO, by using leverage you only need to spend $200.

Beginner Traders Must Know: What is the Forex Market?

Basically, the forex market is a place where sellers and buyers meet with currency as their trading commodity. Every market player can act as a buyer and also a seller, where market players are multinational banks, central banks, large companies, governments of any country, financial institutions, speculators, etc.

The FX market is open 24 hours from Monday to Friday which is divided into 3 trading sessions:

• Asian Session: 05.00 – 16.00
• European Session: 13.00 – 22.00
• American Session: 20.00 – 05.00

These three market sessions are what make trading always open 24 hours for 5 days in 1 week. You can trade whenever and wherever you are.

Forex Trading Illustration

In running its trade, forex trading has a very simple principle, namely getting profit from the difference between the buying price and the selling price, buying at a lower price and selling at a higher price (and vice versa).

For example, the Euro is currently at a price of 1.13000. In a few hours later the Euro currency rose 10 points to 1.13100. Where per 1 point increase is worth $ 10, so with an increase from 1.13000 to 1.13100 the profit obtained is 10 points x $ 10 = $ 100.

Risks In Forex

Having many advantages does not mean that forex trading has no risks. FX trading can be said to be a double-edged sword where we can get quite a large profit but at the same time we can also get quite a large loss too.

This risk cannot be avoided or eliminated at all, the risk will still be there but you can do risk management to minimize the risk. With good risk management you can manage trading well and can measure how much profit or loss is obtained.

Thus is the basic guide to learning forex trading for beginner traders. By continuing to learn and being consistent in trading, it is hoped that you can become a successful beginner trader who achieves the desired profit.

Visit GIC Indonesia to get information about the world of trading. You can also join us in the Telegram Community GIC Trade and Telegram Channel GIC Trade. Don't forget to check the Youtube account GIC Indonesia which is full of lots of information, and follow our Instagram account to get information about various interesting webinars that you can follow.

FAQ's

Q: How long does it take to become a successful trader?

A: The time required varies, but it usually takes several years to develop the necessary skills and intuition.

Q: Do I need a financial background to become a trader?

A: No, a financial background is not a requirement. However, an understanding of economics and markets can help.

Q: Can I trade with a smartphone?

A: Yes, many brokers offer mobile apps that allow you to trade flexibly.

Q: How to overcome losses in trading?

A: It is important to have a strong risk management plan and not to invest all of your capital in one trade.

Q: Is technical analysis better than fundamental analysis?

A: Both have their own advantages. It is better to combine both for better decision making.

Q: Are there any educational resources you recommend?

A: You can access webinars and educational materials from leading brokers like XYZ.

Source :

“10 Tips for Beginner Traders”, Juruscuan.com

"7 Ways to Trade Stocks and Forex, Beginner Traders Must Know", Ajaib.co.id

“Want to Learn Forex Trading? Follow These 6 Steps”, CIMBNiaga.co.id

“Beginner Trader? Avoid These Mistakes!” Bions.id