The Best Regulated Forex Brokers

Documentation and analysis

Two of the most critical elements in trading success are documenting and analyzing your trades. Every deal must be documented and evaluated to see why it was successful or unsuccessful. Prepare questions that you will answer for each completed Forex trade. For example, these questions could be:

• Which Forex signals prompted me to make the trade at this point?
• Did I change my plan during the trade?
• Why did I change the plan?
• What do I do the same next time?
• What will I do differently next time?
• When could I have adjusted my stop loss or taken profit?
• How did news affect currency rates and did I interpret them correctly?

Once you have found a documentation and analysis system for yourself, you should, or rather you have to, use this system for every Forex trader. It doesn’t matter whether you made a profit or a loss on the trade. Because as the saying goes: “You learn from mistakes!” And of course, this also applies to learning Forex!

Currency pair	Technical term
EUR USD	Euro
GBP / USD	Cable
USD / CHF	Swissy
USD / JPY	yen
AUD / USD	Aussie
NZD / USD	kiwi
USD / CAD	Loonie

Abbreviations for the major currencies

• US dollar ( USD )
• euro ( EUR )
• British pound ( GBP )
• Swiss Franc ( CHF )
• The Canadian dollar ( CAD )
• Australian dollar ( AUD )
• New Zealand dollar ( NZD )
•  Japanese yen ( JPY )

What is a currency cross?

A  currency cross is a currency pair that consists of the most important currencies but does not include the US dollar. These currency crosses are not traded as often as the currency pairs mentioned above, but they still play an important role in the financial market.

What are majors & minors?

You will often hear the terms majors and minors when trading Forex. The major currencies are grouped under majors – one speaks of the main currency pairs.

Minors, on the other hand, are those currencies that are not traded in this frequency and size and therefore only occupy a smaller area of ​​the foreign exchange market (minor currency pairs). Well-known currencies here are the Mexican peso (MXN), the South African rand (ZAR), or the Russian ruble (RBL).

Forex beginners should start trading with majors. Since the exchange rates of the Minors are usually subject to greater fluctuations, only experts should trade with them.

What is an Ask or a Bid course?

The Forex broker shows two prices for a currency pair with the ask and bid price. The asking price is the selling price and thus the price that a trader wants to achieve when he sells his currency. So this is the best possible price that you can currently buy a currency at. The asking price is also known as the asking price, buy price, or offer price.

The bid rate is the opposite of the asking rate and describes the price that you can get for selling a currency. The bid price is also known as the bid price or sell price and is always lower than the asking price.

What is the spread?

The difference between the ask and bid prices is known as the spread. In currency trade, the broker receives this difference as payment for his work. The buyer pays the asking price, the seller receives the bid price and the broker is satisfied with the spread. The spread is always given in pips. Not all brokers work with a fixed spread, as this also depends on the liquidity of the market.

What’s a pip?

The smallest measured change in the rate of a currency pair is shown in pips. Pip is the abbreviation for percentage in point. As a rule, it is the fourth decimal place of the price. For example, if you buy EUR / USD for $ 1.1101 and sell it for 1.1105, you have made 4 pips profit on this trade. In the case of currency pairs with the Japanese yen (JPY), the second decimal place is already referred to as a pip, because the yen is of little value compared to other currencies.

What is a plumb bob?

The trading volume in  Forex trading is given in lots. A standard lot is made up of 100,000 units of a certain currency. In the past, it was only possible to trade currencies in standard lots. In the meantime, the brokers have expanded the volume with mini, micro, and nano lots. These have a volume of 10,000, 1,000, and 100 units of the currency. The large volume is only necessary for currency trading due to the small rate changes of only a few pips. If you want to exercise caution at the beginning, use the small trading volumes.

What is the margin?

The margin is the security that has to be provided for trade and therefore, so to speak, the stake that you need for a trade. The margin results from the leverage and vice versa. If the leverage is 100: 1, the margin is 1 percent, ie you have to cover 1 percent of the trading volume via the trading account when the trade is concluded. Accordingly, the margin is 5 percent when the leverage is 20: 1 and 0.5 percent when the leverage is 200: 1.

What is a margin call?

If there are open positions in the trader’s account and there is a loss that has also exhausted the margin, the broker can call the margin call. The trader then has to top up his credit balance, otherwise, the positions will be closed and any profits can no longer be generated.

What is scalping?

With scalping, the aim is to keep positions open only for a short time and to generate small but large profits. The positions are kept open for a maximum of two minutes, often only a few seconds. If the intervals are longer than two minutes, it is termed intraday trading rather than scalping. Profits range from one to five pips per trade, so a large number of positions and leverage are required to make the strategy lucrative. The lot size is also decisive here. Of course, you can make substantially more money with ordinary lots than you can with a micro lot if you make 1 pip greater.

However, this strategy is not necessarily suitable for beginners. Since high leverage and large lot sizes are used, laypeople can use up their trading capital quickly. In addition, it takes some experience to cope with the nervous strain and some discipline to optimally pursue the strategy. Furthermore, “scalpers,” as practitioners of this approach are known, rarely use stop-loss or take-profit functions since determining them takes too long.

What are candlestick charts?

The most popular form of chart presentation among traders is the candlestick variant. As the name suggests, the prices are shown here in the form of candles. The candles have two different colors. Depending on the software, this is usually red for falling prices and green for rising prices. But black and white representations are just as possible as individual settings.

The bottom point of the candle shows the lowest price reached in this interval, the top point shows the highest price. The candle body shows the opening and closing prices for this interval. In the case of a “positive” candle, the upper edge of the body is the closing price and the lower edge is the opening price. With a candle that represents falling prices, it is logically the other way around.

Forex Trading Example:

Anyone who has ever gone on vacation and couldn’t pay in euros had to convert the cash to the local currency. For our example, let’s just assume that you traveled to the United States and needed US dollars. Then you went to the nearest bank before starting your trip and changed 1000 euros into dollars. Since the exchange rate at this time was EUR / USD 1.25, you received $ 1,250 for your 1000 euros.

After that, you flew to New York City for two wonderful weeks. But when you got home, you had exactly $ 125 in your wallet. Now one could assume that if you go to the bank, you should get exactly 100 euros again. But since the dollar’s rate against the euro rose during this period, the EUR / USD ratio also changed. This now stands at EUR / USD 1.11. This means that for one euro you no longer get 1.25 dollars as you initially got, but only 1.11.

However, this exchange rate development is an advantage for you, as you get more euros for one US dollar. At first, you would have received 0.8 euros for one dollar. This can be easily calculated if you divide one euro by the EUR / USD 1.25 rate at the time.

In our case 1 / 1.25 = 0.8. This means that at the original exchange rate you would have received EUR 0.80 for one US dollar. However, if we calculate with the current rate, you get exactly 0.90 euros for one dollar (1 / 1.11 = 0.90). If you add this to the $ 100 you still have in your wallet, the bank will give you 90 euros. In the end, this means that you have made a plus of 10 euros by changing the exchange rate of the currencies.