Learn to trade forex
New to trading? You’ll find all the trading basics you need to know to get started on your journey here.
The pip value is the price attributed to a one-pip move in a forex trade – it is often used when referencing a position’s losses or gains. … To calculate pip value, divide one pip (usually 0.0001) by the current market value of the forex pair.
Trend refers to the direction of travel in an instrument’s price over a specific period. These trends are often highlighted on a chart through the use of trend lines which join two or more price points together under a straight line.
Trend lines can be used to identify support and resistance levels or possible turning points in price action, as well as to highlight potential entry and exit points for a trade.
Technical and price action analysis are two very popular trading studies that both involve the use of charting to comprehend market sentiment, psychology and behaviour. However, both have defined differences.
We offer a wide range of energy, soft commodities and precious metals, each with different minimum trade and margin requirements, spreads and contract sizes. There are also different session times, so it’s important to understand these when you start trading commodities.
Forex trading is the simultaneous act of buying one currency while selling another.
The combination of these two currencies make up what’s known as a currency pair. Currencies are always traded in pairs, and each currency in a pair is represented by a unique three-letter code.
The first two letters in the code represent the country, and the third letter identifies the currency, such as the code JPY = Japanese Yen.
Forex prices are known as rates, and they express the value of one currency in terms of the other.
They’re often automated as studies and applied to charts to help add extra information about the direction or prospects of an instrument’s price.
Indicators may be displayed on the main body of a chart, in a separate chart attached to it or as values independent of any chart.
When used with a chart, indicators are often displayed as lines, and the interaction between those lines, or between them along with the underlying price can be used to determine what the next moves in price may be.
While technical and price action analysis probes on the ‘what’, fundamental analysis is interested in the ‘why’.
Fundamental analysis is an incredibly diverse discipline and can take time to master, which is why so many retail traders start their trading journey by studying technical analysis.
So, whether we’re anticipating and subsequently reacting to news, corporate earnings, economic data, central bank action or politics, trading using fundamentals is about gathering knowledge as to why a market is reacting the way it does. It also helps us understand whether these variables will continue to influence price going forward – and to what degree.
Unlike technical or price action analysis, which in many ways attributes very little to the individual market in question other than different the trading hours and the cost to trade, how you analyse fundamentals can differ depending on the specific instrument or market involved.
For example, we know that an unexpected change of communication from the Federal Reserve is going to affect all markets but fundamental analysis allows us to understand to what degree. A substantial political surprise, as we saw in the Brexit referendum, would affect the GBP, but it would also impact the FTSE 100 and the UK bond market.
This means achieving the correct exposure on each position relative to the size of your account and taking the time to understand how volatility and the recent moves in price affect how much risk you’re prepared to take.
It also includes assessing the event risk to better understand the potential market-moving catalysts that could affect price and your open trades.
If you’re concerned about a potentially adverse move based on an announcement that’s completely out of your control, we always suggest you look to reduce your exposure into that event.