Basics of forex trading
Trading for beginners
FOREX 1: Understanding the Basics (Revision)
Forex is short for Foreign Exchange — the world’s largest financial market where over $5.3 trillion is traded every day.
HOW DOES FOREX WORK?
Forex trading works like buying and selling products, but online.
The goal is simple:
- Buy low and sell high, or
- Sell high and buy back low
In Forex you can make money even when the market is falling — by selling.
Example:
You buy a drink for $2 and sell it later for $10.
Profit = $8.
That’s how Forex works.
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Download MT5 App (phone) or MT4 (PC).
When you open the platform, you will see charts/graphs showing price movements.
There are only three market movements:
1. Uptrend (Market Rising)
- This is where you BUY
- Buy at a low price and sell at a higher price.
2. Downtrend (Market Falling)
- This is where you SELL
- Selling is like getting rid of something losing value — like old phones (Nokia Xpress Music, Samsung E250).
You don’t buy something whose price is dropping.
3. Neutral/Sideways Market
- Market is moving up and down in a tight range
- You don’t buy, you don’t sell.
- Just like a car in neutral — it won’t move.
FOREX 2: Understanding Currencies, Pairs & New Orders (Revision)
Base Currency
When opening an account, you choose a base currency (USD, EUR, GBP, ZAR).
Most traders choose *USD, but *GBP is stronger, so your profits and withdrawals will be in pounds.
8 Major Currencies
- USD – US Dollar
- EUR – Euro
- GBP – British Pound
- JPY – Japanese Yen
- CHF – Swiss Franc
- AUD – Australian Dollar
- NZD – New Zealand Dollar
- CAD – Canadian Dollar
These are the most traded currencies in the world.
If you want better opportunities, trade pairs that include at least one of these.
Currency Pairs
A pair combines two currencies:
- EURUSD
- USDJPY
- GBPUSD
- USDZAR
The currency on the left is stronger than the one on the right.
✔ If the chart is rising → left currency gaining value
✔ If the chart is falling → right currency gaining value
Types of Orders
- Market Execution – Buy/sell immediately
- Pending Orders – (Buy Stop, Sell Stop, Buy Limit, Sell Limit)
FOREX 3: Understanding Spreads, Pips & Lot Sizes (Revision)
Spreads
A spread is the fee brokers charge when you open a trade.
That’s why every trade starts in a small loss.
Just like paying a taxi before you start the journey.
Pips
Pips are the “distance” price moves.
More pips = more money.
Lot Sizes (Trading Units)
You don’t buy one item in Forex — you buy in units called lots.
Micro Lots (0.01–0.09)
- 0.01 = $0.10 per pip
- 0.05 = $0.50 per pip
Mini Lots (0.10–0.99)
- 0.10 = $1 per pip
Standard Lots (1.00 → 1000.00)
- 1.00 = $10 per pip
- 2.00 = $20 per pip
FOREX 4: How Money is Made in Forex (Simple Formula)
Formula:
Lot Size × Pips = Money
Example: 3 traders enter and exit a Gold buy at the same time:
- Lerato – 0.01 lot, gains 200 pips →
$0.10 × 200 = $20 - Ndamu – 0.10 lot, gains 200 pips →
$1 × 200 = $200 - Tebogo – 1.00 lot, gains 200 pips →
$10 × 200 = $2000
Same pips, different profits.
Bigger risk → bigger reward.
FOREX 5: Understanding Candlesticks
Candlesticks are the most popular chart type — used by over 80% of traders.
Green Candlesticks (BULLS)
- Show upward movement (Uptrend)
- Candle opens at the bottom and closes at the top
Red Candlesticks (BEARS)
- Show downward movement (Downtrend)
- Candle opens at the top and closes at the bottom
Example chart: GBPJPY — H4 timeframe
Trading requirements
PC/ SMART PHONE /ANDROID PHONE
INTERNET/ WIFI
NB: Every trader must register to a broker. There are so many brokers in the world, but the best brokers are those with easy deposit and withdrawal methods.
Click 👉Register your trading account using your broker of choice here
YOU can also read Deriv vs Weltrade which one is better for synthetics
