📊 Trading Basics

The foreign exchange (Forex or FX) market is a global marketplace for exchanging national currencies against one another.

High liquidity, 24/5 access, and the ability to trade with leverage make Forex attractive to individual traders.

Participants include banks, governments, financial institutions, corporations, and retail traders.

In Forex, currencies are quoted in pairs, such as EUR/USD. The first currency (EUR) is the base currency and the second (USD) is the quote currency. Major pairs always include the US dollar and are the most traded, offering high liquidity and low spreads. Minor pairs, also known as cross currency pairs, do not include the US dollar but involve other major currencies such as EUR/GBP or AUD/JPY. Exotic pairs combine a major currency with one from an emerging or smaller economy, for example USD/TRY (US Dollar/Turkish Lira). Majors tend to move more smoothly, while exotics can be more volatile and carry higher transaction costs.

The price of a currency pair shows how much of the quote currency is needed to buy one unit of the base currency. For example, if EUR/USD is trading at 1.1000, it means 1 Euro costs 1.10 US dollars. When the price rises, the base currency is strengthening against the quote currency; when it falls, the base is weakening. Traders go “long” when they expect the base currency to rise and “short” when they expect it to fall.

Understanding the type of pair you’re trading helps you anticipate potential volatility, liquidity, and trading costs. Major pairs are often best for beginners due to their stability and low spreads. Exotic pairs can offer larger price swings but also greater risk. Knowing the characteristics of your chosen pairs can help you tailor your strategy and manage your risk more effectively.

In Forex, you can make money in both rising and falling markets:

• Going Long – You buy the base currency, expecting it to rise in value.
• Going Short – You sell the base currency, expecting it to fall.

Example: If you go long on EUR/USD and the price rises, you profit. If it falls, you lose.

Understanding how price moves and how trade sizes affect your profits:

• Pip: The smallest price movement, usually 0.0001 in most pairs.
• Lot: A trade size. 1 standard lot = 100,000 units of currency.
• Mini Lot: 0.1 = 10,000 units. Micro Lot: 0.01 = 1,000 units.
• Spread: The difference between the bid and ask price. This is your broker’s fee.

Example: If EUR/USD moves from 1.1000 to 1.1005, that’s a 5-pip move. On a 1-lot trade, that’s $50.

Forex prices are quoted with two values:

• Bid Price: The price you can sell at (lower).
• Ask Price: The price you can buy at (higher).

The difference between them is the spread.

Example: EUR/USD = 1.1000 / 1.1003 → Spread = 3 pips

Position sizing is about deciding how much of your capital to risk on each trade. A common rule is to risk no more than 1–2% of your account balance on a single trade. For example, with a $5,000 account and 1% risk, the maximum loss per trade should be $50. Correct position sizing ensures you stay in the game long enough to benefit from your strategy and experience.

Leverage allows traders to control a larger position in the market with a smaller amount of capital. For example, with 1:100 leverage, a $1,000 deposit gives you control over a $100,000 position. While leverage can magnify profits, it also increases potential losses. Used wisely, it can be a valuable tool; used recklessly, it can quickly wipe out your account.

Margin is the amount of money your broker requires you to deposit to open a leveraged trade. Think of it as a “good faith” deposit to keep your position open. For example, if you trade 1 lot (100,000 units) of EUR/USD with 1:100 leverage, your broker might require just $1,000 in margin to open the trade. If your equity falls below the required margin, you could receive a margin call and have positions closed automatically.

High leverage can make the Forex market exciting but also dangerous. New traders often underestimate the risk and overestimate potential returns. Choosing appropriate leverage and maintaining healthy margin levels is crucial for long-term survival. Always calculate your position size based on your risk tolerance, and remember: protecting your capital should come before chasing profits.

In trading, protecting your capital is just as important as making profits. Risk management ensures you can survive losing trades and continue trading over the long term.

Position sizing determines how much of your capital you risk on a single trade. A common rule is to risk no more than 1–2% of your account on any given trade, ensuring that no single loss can significantly impact your portfolio.

A stop-loss order automatically closes your trade if the market moves against you by a set amount. This limits potential losses and removes emotional decision-making from the equation.

This ratio compares the potential profit of a trade to the potential loss. Many traders aim for at least a 1:2 risk-to-reward ratio, meaning they seek twice as much reward as risk.

Emotions like fear, greed, and impatience can cloud judgment and lead to poor decisions. Successful traders learn to recognise and manage these emotions to stay disciplined.

Following a trading plan consistently is key to long-term success. Discipline means sticking to your strategy, even when tempted to deviate after wins or losses.

Not every moment is a trading opportunity. Patience allows traders to wait for high-probability setups instead of chasing the market and forcing trades.

Every trader experiences losing trades. The key is to review them objectively, identify mistakes, and adjust strategies accordingly rather than letting losses damage confidence.

Taking too many trades in a short period often leads to poor decision-making and higher losses. Quality of trades is more important than quantity.

Failing to set stop-losses or risking too much capital on a single trade can quickly lead to significant account drawdowns.

Entering trades out of fear of missing out (FOMO) often means buying high or selling low. Successful traders wait for their setups instead of reacting impulsively.

Trading without a plan leads to inconsistency and emotional decision-making. A well-defined plan keeps you focused and disciplined.

Decide whether you aim for steady income, long-term growth, or learning experience. Your goals will shape your trading strategy and risk tolerance.

Focus on a manageable set of currency pairs or assets you understand well. Specialising helps you recognise patterns and market behaviour.

Define exactly what conditions must be met before you open or close a trade. This could be based on technical indicators, price patterns, or fundamental events.

Keep a trading journal to record your trades, reasons for entry and exit, and results. Regularly review it to identify strengths, weaknesses, and areas for improvement.

MetaTrader is a free trading platform used to analyze charts, place trades, and automate strategies using custom tools. It’s offered by most Forex brokers and is available for Windows, macOS, mobile, and web.

• Real-time price charts
• Dozens of built-in indicators
• One-click trading
• Supports automated trading via Expert Advisors (EAs)

Key sections of the MetaTrader platform include:

• Market Watch: Lists real-time bid/ask prices of trading pairs.
• Chart Window: Where you analyze price movement and apply indicators.
• Navigator: Gives access to your accounts, indicators, scripts, and EAs.
• Terminal: Shows trade history, alerts, and your open/closed positions.
• Strategy Tester: lets you run your trading strategy on past market data to see how it would’ve performed—before risking real funds.

💡 Right-click almost anywhere on a chart for more settings or options.

MT4 & MT5 support custom tools written in MQL4 & MQL5, a powerful scripting language for trading automation and analysis.

• Indicators: Visual tools added to charts to help identify trends, entries, and exits.
• Expert Advisors (EAs): Automated programs that can open, close, and manage trades for you based on defined rules.

To use custom indicators or EAs, place the file into your - /MQL4/Indicators folder or - /MQL4/Indicators folder, then restart MetaTrader or refresh the Navigator.

💡 All our products are fully compatible with MT4 & MT5

This involves studying price charts to identify patterns and trends. Traders use tools like indicators, candlestick formations, and support/resistance levels to forecast future price movements.

• Indicators: RSI, MACD, Moving Averages, Bollinger Bands
• Chart Patterns: Head & Shoulders, Double Tops, Triangles
• Support & Resistance: Price levels where movement tends to stall or reverse

Most of the tools built into MT4 — including custom indicators — are for technical analysis.

This method is based on economic data, news events, and geopolitical developments that affect a currency’s strength.

• Economic Indicators: Interest rates, GDP, inflation, employment reports
• Central Bank Policies: Speeches or decisions from the Fed, ECB, BoJ, etc.
• News Events: Political instability, war, natural disasters, elections

Fundamental analysis helps explain why a currency might gain or lose strength over time.

Sentiment analysis looks at what other traders are doing or feeling about a market. It’s about gauging crowd behavior and potential overreactions.

• Positioning Data: Are most traders long or short?
• News Sentiment: Are headlines bullish or bearish?
• Volatility Indicators: Spikes in fear or uncertainty can drive sharp moves.

Used alongside technical and fundamental analysis, sentiment adds an extra edge to decision-making.

A candle that fully “engulfs” the prior candle—its body completely covers the previous candle. This often signals a bullish reversal and can pinpoint entry zones.

The opposite of a bullish engulfing: a bearish candle that fully covers the previous candle’s body. Typically suggests a bearish shift—a potential sell signal.

A candle with a small body and a long tail (wick), showing a sharp rejection of higher or lower prices. Great for catching reversals—especially when near support or resistance.

A candle whose open and close are nearly the same—indicating indecision in the market. When appearing after a trend, it can signal a potential pause or reversal, depending on what follows.

A reversal pattern where price tests the same high (Double Top) or low (Double Bottom) twice, failing to break through. Often signals that the trend is weakening and may reverse.

A candle that forms completely within the high–low range of the previous candle. Indicates market consolidation and can precede strong breakouts in either direction.

A Moving Average smooths price data to highlight the underlying trend. Traders use it to identify trend direction, spot potential support and resistance levels, and generate signals when price crosses the average.

The RSI is a momentum indicator that measures the speed and change of price movements. It helps traders identify overbought or oversold conditions, with readings above 70 typically indicating overbought and below 30 indicating oversold levels.

The MACD is a versatile trend-following momentum indicator that shows the relationship between two moving averages of price. It helps traders spot shifts in trend direction, gauge strength, and measure momentum. Signals are generated through three key elements: the MACD line, the signal line, and the histogram. Crossovers between the MACD and signal line highlight potential buy or sell opportunities, while the histogram visualizes the distance between them, making it easier to identify accelerating or weakening momentum.

Bollinger Bands are a volatility indicator that plots a moving average with an upper and lower band based on standard deviation. The bands expand when volatility rises and contract when it falls. Price touching or breaking outside the bands can signal overbought or oversold conditions, while squeezes (tight bands) often hint at upcoming breakouts.

The Stochastic Oscillator is a momentum indicator that compares a closing price to its price range over a set period. It helps traders identify overbought and oversold conditions, with values above 80 often signaling overbought and below 20 signaling oversold. Crossovers between the %K and %D lines can also highlight potential trend reversals.

The CCI is a momentum-based oscillator that measures how far price has moved from its statistical average. It helps traders spot overbought and oversold levels, as well as potential trend reversals. Readings above +100 suggest price may be overbought, while readings below –100 indicate oversold conditions.

The ATR measures market volatility by calculating the average range between high and low prices over a set period. It doesn’t indicate trend direction but helps traders assess risk, set stop-loss levels, and gauge potential price movement.

The ADX measures the strength of a trend, regardless of direction. Values above 25 generally indicate a strong trend, while values below 20 suggest a weak or ranging market. Traders often use it alongside the +DI and –DI lines to identify trend direction and potential entry points.

The WPR is a momentum indicator that shows overbought and oversold conditions by comparing the current closing price to the highest high over a set period. Readings above –20 suggest overbought conditions, while readings below –80 indicate oversold levels, helping traders time entries and exits.

The Momentum indicator measures the rate of price change over a specific period, showing how quickly price is moving. Traders use it to identify the strength of a trend, spot potential reversals, and confirm breakouts.

Ichimoku Kinko Hyo is a comprehensive indicator that displays support, resistance, trend direction, and momentum at a glance. It combines five lines—including the Tenkan-sen, Kijun-sen, and Senkou Span—to help traders identify trends, potential reversals, and trade setups.

The Parabolic SAR (Stop and Reverse) is a trend-following indicator that plots points above or below price to signal potential reversals. Traders use it to identify entry and exit points and to set trailing stop levels in trending markets.

Envelopes are trend-based indicators that plot two bands above and below a moving average to highlight overbought or oversold conditions. Traders use them to spot potential reversals, confirm trends, and identify optimal entry and exit points.

Fibonacci Retracement levels help traders identify potential support and resistance zones by measuring key price levels between a high and low. They are widely used to anticipate reversals, pullbacks, and target areas within trends.