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FOREX is the acronym of foreign exchange and the real meaning is trading between currency pairs for making profit from their difference. For example the EUR against the USD is at 1.5587/1.5590. If you think it’s going up you buy at 1.5590 if you think it’s going down you sell at 1.5587. It’s simple and with patience and the right info you can earn you living with FOREX.

You can start with as little as $1 but I think the best is to start with a capital arround $300 to $450 so you can trade with the minimum investment needed per position and always have money to support a trade if it’s not going the way you thought but you don’t want to close it because you think it’s going to change and makes you money in the future.

Read this carefully because here are the most important things you need to know.

CURRENCY PAIRS: In FOREX you are trading between currency pairs. The price of a pair looks like this : EUR/USD 1.5540/1.5543. The first price (1.5540 in our example) is the sell price. If you think it’s going down you click on the sell price. The second price (1.5543 in our example) is the buy price. If you think it’s going up you click on the buy price.

PIP: The term used for counting the currency pairs movement. For example if you bought EUR/USD at 1.5587 and now it is at 1.5647 we say that the EUR/USD went 60 pips up.

LEVERAGE: All FOREX online trading platforms give leverage to their clients. Leverage allows you to trade with more money than you have invested. For example if your broker gives you leverage 200:1 this means that with $25 in your account you can trade with $5000. But be carefull!!! Leverage is good and bad! You may gain a lot but also lose a lot. Example: You buy 5000 (remember you have 200:1 leverage and you only need $25 to buy 5000) GBP/USD at 1.9620. If GBP/USD goes to 1.9700 you will gain $40 (80 pips * $0.5 every pip) but if it goes to 1.9540 you will lose $40.That’s why you need to be careful.

STOP LOSS: You set a stop loss in your trading platform to stop a lossing trade. For example you buy EUR/USD at 1.5560 and you set a stop loss at 1.5500. If the EUR/USD goes to 1.5500 the trade is closed automatically.

LIMIT ORDER: You set a limit order in your trading platform to stop a winning trade when you think it has gained you enough money. For example you buy EUR/USD at 1.5560 and you set a limit order at 1.5700. If the EUR/USD goes to 1.5700 the trade is closed automatically.

And now that I’ve covered the things I consider important let’s make your first fantasy trade so you can uderstand how FOREX trading works.

You wake up, arround 10 am in the morning, you make a cup of coffee and open your online trading platform. You look at the currency pairs and you choose to trade with USD/JPY. You look at the charts a week ago and you see that the USD/JPY is moving between 103.2 and 104.6 but today the price is 105.2. You decide to sell because you think it’s going to fall down. You have $300 in your account and you use 25$ to sell 5000 USD/JPY. You set a limit order at 103.8 and a stop loss at 106.2. Now you have to wait. You watch TV,you play some video games etc. After 2-3 hours the USD/JPY is at 105.4 but you don’t worry. You are sure it’s going to fall so you keep waiting. You turn off you PC, go for a walk, meet some friends and after 4-5 hours you return at home. You turn on your PC and your online trading platform and you see that the USD/JPY is at 103.46 and your traded is closed. You just made $70. Now you have $370 in your account and you can start thinking of your next trade.