What are Lot in Forex

LESSON NO 19

What are Lot in Forex:      Lot express the value in forex.  There are three types of lots:

Ø  Micro Lot  :  It means that one pip is equal to 10 cents, in trading you will gain profit or met loss 10 cents per pip.

Ø  Mini Lot  : In mini lot one pip is equal to 1 dollar which means that during the course of trading you will earn or loose one dollar for every pip.

Ø  Standard Lot  : In Standard Lot one pip is equal to 10 dollars so if you have earned one pip you have earned 10 dollars and if you have lost one pip you have met a loss of 10 dollars.

What are Types of Order in Forex:       In forex trading there are mainly two types of orders:

Ø  Instant Execution / Market Order           :           Trading on Current Market rates is called market order.  If you are buying or selling any pair on the rates shown on your platform it is called market order

Ø  Pending Order        :           There are two sub categories of Pending Orders:

Ø  Stop Orders       :           In Stop orders you buy on higher rates than current market rats of sell on lower rates than current market rates.  For example if current price of EUR/USD is 1.3060 and you want that if it reaches at 1.3040 and you sell then you have two options either stick in front of your computer / laptop and stick to screen to watch the price variations carefully or place a stop order and when price will reach at 1.3040 your order will be executed and your trade will automatically be opened.

Ø  Limit Orders      :           In limit orders we buy below current market rate or sell above current market rates.  For example if current price of EUR/USD is 1.3060 and you want to buy at the price of 1.3030 then you will place a pending Limit order and as the price will hit 1.3030 you buying trade will be automatically executed and opened.

How to Earn money from Forex Trading

LESSON NO 18

How to Earn money from Forex Trading

It is the most important question for new traders as well as for old and experienced traders.  If you don't know the art of earning profits from Forex Trading then this nothing else but just a waste of time and money to indulge in Forex Trading.  So let's learn how can we earn money from forex trading.

In forex trading either a currency is bought or sold.  For example if price of EUR/USD is 1.3033 and you assess that price of Euro will increase and you buy this pair, after few hours as per your assessment and analyses price increases and hits 1.3083 and you close your trade, you have earned 50 pips and if your one pip is equal to 1 dollar then you have earned 50 dollars from one trade.

Likewise, GBP/USD price is e.g 1.6087 and you evaluate that price of pound will decrease and you sell that currency pair and after few hours its price decreases and hits 1.6037 and you close your trade, you have earned 50 pips and if your one pip is equal to 1 dollar then you have earned 50 dollars from one trade.

How to read a Currency Pair:

                             GBP             /                       USD :           1.51258

 

                        Base Currency    /     Quote Currency

Currency at the left side is called base currency while the currency at right side is known as counter or quote currency.  During trading base currency is kept in mind for example in currency pair GBP / USD if you want to buy you will buy GBP and if you want to sold you will sold GBP.

What is Long or Short:     If you intends to buy a currency pair I mean if you are going to buy a base currency it will called Buy or Long and if you intends to sell a base currency it will called Sell or Short.

Things to Kept in Mind during Forex Trading:          Following important things are to be kept in mind while executing forex trading.

Before starting any trade, market is analyzed, there are two main types of analysis:

Ø  Fundamental Analysis

Ø  Technical Analysis

What is Fundamental Analysis: We will try to learn with following few examples that what is fundamental analysis:

Examples of Fundamental Analysis

For a currency pair EUR/USD, if we see that there is increasing ratio of unemployment in USA, GNP is decreasing or there is downfall in exports then it means that dollar has become weaker, if dollar is weaker it means Euro has become stronger with regards to dollar so definitely we will buy Euro (I mean EUR/USD Pair) and if the situation is against (employment opportunities are increased, GNP and Exports are also increased) the it means that dollar has become stronger and Euro has become weaker so in this case we will sell EUR/USD.