Welcome to the lucrative world of Forex trading. Only recently has Forex trading become so popular, due to its fast paced movements and its highly potential returns. Until recently, Forex trading was only available to large institutions, central banks, hedge funds and extremely wealthy individuals. Due to the extreme development of the internet over the last few years, small investors can now take advantage of this market, investing their money to benefit from this 24 hour market.

Throughout this guide we are going to cover the basic terminology of this market, while explaining different techniques which will help you develop your trading strategies.

The topics in this guide will give you a brief understanding of this market, while giving you the upper hand to become a Forex trader.

Topics

1) Basic terminology

2) Currency calculations

3) Economic indicators

4) Technical Analysis Basics

5) Using the Platform

6) Summary

Even though this tutorial is full of examples, it is still advisable to conclude each section by practicing the relevant material on your demo account provided by iFOREX.

Furthermore, if you have any additional questions, you can always contact your account manager to receive an immediate answer or explanation.

iFOREX - Tutorial

Basic Terminology

Symbols- An arrangement of letters abbreviating a particular currency, which is globally recognized. The symbol is usually three letters, for example:

United States Dollar - USD

Great British Pound - GBP

In the Forex market, one currency is always traded against another currency.For example, let’s take the GBP/USD

In order to buy Pounds one must sell the equivalent in U.S Dollars.Two trading currencies are called a currency pair, featuring a base currency, that is always on the left side of the pair and a secondary currency which is located on the right hand side of the pair.

In the currency market numerous currencies are traded more frequently than others, making them more liquid and easier to buy and sell. Due to global trends, the U.S Dollar has been the most valued currency over the last couple of decades, making it the most traded currency.

To help understand which currencies are more popular than others, currency pairs are divided into different categories.

Majors - Liquid currencies that trade against the dollar.

Crosses - Popular currencies that trade against each other, not including the USD.

Exotics - Currencies that represent emerging economies. These currencies are often unique to individual countries. An excellent example is the Turkish Lira.

Below is a list of commonly traded currency pairs:EUR/USD, GBP/USD, USD/JPY, AUD/USD, NZD/USD, USD/CAD, USD/CHF

Bid price- The price at which an investor, trader or institution is willing to buy the currency price (Bid for the currency).

Ask Price- The price at which an investor, trader or institution is willing to sell the currency price (Their asking price). Once the Ask price meets the Bid price the transaction is made.

Spread - The difference between the Bid price and the Ask price. Depending on the currency pair, the spread will vary.

Example

The spread on the GBP/USD is sometimes traded at 4 PIPS

BID ASK1.5697- 1.5701= 0.0004=4 PIPS*

PIP - The smallest price change a currency can move.

In our previous example the smallest movement was 0.0004, therefore the spread equals 4 PIPS.

Intraday High - The highest price the currency pair traded that particular day.

Intraday Low - The lowest price the currency pair traded that particular day.

To receive further information regarding currency prices, simply press the “more” button to expand the details of the currencies on our website (www.iforex.com)

Currency Calculation

Due to leverage, currency traders are often confused how to calculate their profits/losses. Even though our trading platform automatically calculates all the necessary equations by converting everything into U.S dollars, you should familiarize yourself with those calculations, in order to build efficient trading strategies.

To demonstrate these calculations, we will use the most commonly traded currency the EUR/USD.

Trade Visual:

In our example we will demonstrate the calculations when opening a 10,000 position. This means that we are purchasing 10,000 Euros, while selling the equivalent in U.S Dollars.

Explanation:

A trader assuming that the Euro is going to strengthen against the Dollar, will buy Euros and Sell Dollars.

A click on the “BUY” button will allow a trader to buy € 10,000 while selling $13,978

€10,000 X 1.3978 (Buy price) = $13,978

Remember that a key benefit of the Forex market is that your money is leveraged (Default = x200). This allows you to open trades much larger than your initial deposit. Furthermore, it allows you to maximize your potential returns while taking advantage of the moving trends.

Once a position is opened, the value of each PIP varies, depending on the position’s size.

Let’s see how much can be made by only a 1 pip move.

As you recall your €10,000 equals $13,978.

€10,000 X 1.3978 = $13,978

Only a 1 pip change from 1.3978 to 1.3979 can change the value of your position and can generate a profit or loss.

€10,000 X 1.3979 = $13,979

This means that the value of each pip on a 10,000 EUR/USD position is worth $1

On a 50,000 EUR/USD position each pip is worth $5.

€50,000 X 1.3978 = $69,890

€50,000 X 1.3979 = $69,895

If you haven’t noticed, this calculation will always give you the value of each PIP in the secondary currency.

As we don’t expect you to do these long calculations each time, we would like to show you a simple formula to calculate the value of each pip.

Example

Simple formulas

1) Deal size = value of each PIP in the secondary currency.

(This formula is only for currencies with 4 digits after the decimal point for instance the EUR/USD)

2) Deal size = value of each PIP in the secondary currency.

(This formula is only for currencies with 2 digits after the decimal point for instance the USD/JPY)

PIP values that are not in USD can be easily converted to the currency requested by using the relevant pair.

10,000

100

10,000 10,000= $1 per pipDeal size €10,000

100 100= ¥100 per pipDeal size $10,000

Economic Indicators

In today’s markets one must understand the importance of economic indicators. On a regular basis each country publishes different results, gauging the strength of various parts of their economy. These indicators tell traders whether the economy is continuing to grow at a steady pace, or if there is a current slowdown due to an economic contraction. Understanding the value of these results normally indicates to traders whether monetary measures are required or not.

Monetary Policy- To keep economic growth under control, preventing inflation or hyperinflation, each central bank uses numerous tools to insure gradual growth or to stimulate the economy after a slowdowns. One of the most common tools used in today’s economic cycle is interest rates.

During economic growth, increasing interest rates are used to offer consumers an alternative to their money. This attracts them to invest in higher yielding assets, therefore allowing central banks to control consumer consumption. A decrease of interest rates is often used to encourage consumption (spending), making returns on savings less attractive.One has to remember that by nature traders will always look for higher returns (higher interest) on their money. Therefore, traders will often follow economic events to anticipate interest rate moves. In order to help first time traders, our web site contains all the major data needed to understand this field. By taking a glance at the economic calendar once a week, a trader can prepare her/his trades accordingly, by knowing what results could affect her/his trade. With the click of a mouse a trader can know exactly what the indicator measures, including its importance. The more important the indicator the more it will have an effect on the intraday trading session.

Simple view

Expanded view

By clicking on the indicator you will receive a full explanation about the indicator and its importance.

Technical Analysis Basics

Charts

A price chart is a sequence of prices drawn over a specific time frame.Technicians, technical analysts, traders and investors can use charts to analyze a wide range of currencies in order to forecast future price movements.

Any currency with price data over a period of time can be used to form a chart.

Example GBP/USD

Charts can be shown in a variety of time scales according to the request of the trader, for example; hourly, daily, weekly ad monthly charts.

There are several types of charts that can be used in order to make decisions, for example:

1) Bar charts.

2) Candle-stick Charts.

3) Dot charts.

4) Line charts.

Charts can be shown in a variety of time scales according to the request of the trader, for example; hourly, daily, weekly ad monthly charts.

Originating from Japan, candlestick charts have become the most popular method for analyzing currency pairs as they consist of 4 parts:

1) Opening price.

2) Closing price.

3) Highest price of that particular time period.

4) Lowest price of that particular time period.

The body of the candle will vary according to the market’s volatility

high

open

close

low

high

open

close

low

Trend lines

Trend - The movement of highs and lows that constitutes a trend. 6

4

2

1

3

5

Trend line - A straight line that connects two or more prices on the chart. A trader will often extend the trend line using it as a future support or resistance line.

Trend lines are also used in order to confirm the price trend.

Support and Resistances

Support and resistance represents key junctions where the forces of supply and demand meet.

Support - A certain price which is strong enough to prevent the current trading price from declining further.

Resistance - A certain price which is strong enough to prevent the current trading price from advancing further.

Example

Popular Technical Indicators:

Moving Averages - An average line that appears on the chart. This line is calculated according to the amount of days requested by the trader.

For example: SMA(30) – Moving average over the last 30 days.

One way of using moving averages

Moving averages are often used to indicate a change in trend, the cross-over between two or three moving averages will hint to the trader that a new trend could be starting or the current trend has possibly come to an end.

RSI - (Relative strength index) - The RSI quantifies the current direction and strength. This indicator is often used to follow the current trend in order to see if the trend is losing its current strength.

One way of using the RSI

Traders often class RSI>70 to be overbought and RSI<70 to be oversold. This can indicate the start or the end of a trend

Technical analysis is a tool that assists traders to make decisions regarding their future trading strategies. While one cannot rely only on technical analysis, together with fundamental analysis, a trader can build an arsenal of tools in order to efficiently trade the markets.

For further assistance with technical analysis, including additional learning material, feel free to contact your personal account manager.

Web VersionDownload Version

Using the Platform

iFOREX provides you with a trading platform customized to meet your trading experience, volume activity and internet connection speed.

To meet your trading standards, we have developed two types of trading platforms. One, a download version for stationary traders, and another, a full and complete web based platform for mobile traders. Both trading systems accommodate the same username and password giving you access to instant rates, while allowing you to monitor your trades.

Both systems were designed user-friendly, allowing traders to execute different trades with the click of a mouse.

Due to the similarity between the two systems, this tutorial will only explain the web-based version, as new traders find it easier to use.

After logging into the system through the login button (situated on the main page), it is advisable to click on“Open Deals” (top left hand side of the screen). This organizes the screen for the user, simulating the download version.

Monitoring your account

To monitor your account is simple. You can always observe the status of your account by looking at the data in the ‘Account summary’ section.

Current status of your open positions.

Closed positions.

Account balance including open positions.

Current exposure to the markets.

Maximum amount of exposure allowed

Equity/ Net exposure

Opening a new position

1) New deal - This button (located in middle of the screen) allows traders to open new deals while using Advanced orders: Stop-losses and Take profits. After clicking on the new deal button, simply choose the parameters of your trade and hit the ‘Deal’ button.

Think that the base currency is going to go up? Click on the buy button.

Think that the base currency is going to go down? Click on the sell button.

Remember that currencies always trade in a pairs, meaning that if one currency strengthens the other will weaken.

Advanced orders

Stop-loss: Setting a price/amount in the system that will automatically close the position, preventing additional losses.

Take Profit: Setting a price/amount in the system that will automatically close the position, capturing your profits.

These two functions allows traders to control their portfolios while absent from the computer. Once a position has been opened, the position will automatically appear below (open deals box) allowing traders to view the status.

2) New limit - This function allows traders to submit an opening order in the system. The order will only execute once the desired price is hit- opening the position. Traders often use this function to set orders if they are absent from their computers, allowing them not to miss a trade.

Closing a Position

To close a position is easy, all that is required is to select the position and click on the ‘Close Selected’ button, located in the middle of the screen.

Summary

At iFOREX we provide our traders with up-to-date trading tools, including a 24 hour dealing desk. Our professional trading team together with our multilingual dealing desk are here to assist you at any time.

To receive our contact details please go to our web site at www.iforex.com

In order to benefit from the Forex market one must be constant with her/his trading rules. Building strategies are essential for success.

Begin trading on your demo account while gradually opening live positions simultaneously. Once more confident, enjoy the trends while seeing your portfolio grow.

Good luck trading

iFOREX Team

The risk of losses involved in the transaction or speculations in the foreign currency market or other financial markets can be considerable. Trading in currencies or commodities isn't suitable for every investor based on the fact that the currencies, markets or commodities are likely to fluctuate according to the market conditions Please think carefully whether such trading suits you, taking into consideration all the relevant circumstances as well as your personal resources. Speculate only with funds that you can afford to lose. For more information please refer to our Risk Disclosure.

The high degree of leverage that is obtainable in the trading of off-exchange FX transactions can work both against you as well as for you. Leverage can lead to gains as well as losses

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