Forex Trading Concepts

Forex Trading Concepts And Terms

Mastering basic forex trading concepts and industry vocabulary are solid first steps on your educational journey. From pips and P&L to creating forex trading strategies, we have a wide range of topics to help bring your skills to the next level.

What is Forex? Forex Trading Concepts map

What is a Pip?

A point-in-percentage, or pip for short, is a standardized unit used to measure small changes in the pricing of a currency pair. The tiny pip increment ensures that consistent trading opportunities are available, as even minor market shifts can create potentially lucrative trade setups, as well as potential losses. In addition, the pip fundamentally enhances the precision of orders and specificity of spreads. All of our platforms automatically count pips to show your trade’s profit or loss.

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Understanding Forex Quotes

Forex prices are quoted in pairs. Understanding how currency pairs are quoted is critical to trading competently. Know the difference between a base and counter currency, and how the pricing of each impacts the bid/ask spread.

Understanding Forex Quotes

Understanding Forex Order Types

Familiarizing yourself with the forex order types a key part of any forex trading strategy. Orders allow you to set a specific price target to buy or sell to in order to open or close a trade once that rate is reached. They can be used to limit risk or capture profit and are a key component of risk management. Please be aware that placing contingent orders does not limit your losses.

More on Order Types

Ins and Outs of Trading Currencies

In addition to understanding order types, this comprehensive guide will show you more about the range of opportunities in the forex market and how to spot them.

The Ins and Outs of Trading Currencies

Liquidity and Volatility

Two important forex trading concepts are liquidity and volatility, which greatly influence the effectiveness of any strategy executed on the open market.

Liquidity and volatility are typically influenced by market events including geo-political news and economic announcements. Liquidity refers to the number of buys and sellers participating in the market. Volatility reflects a deviation of rates from a baseline value. Volatility can increase risk but also creates opportunity.

Forex Liquidity and Volatility

Margin and Leverage

Forex is leveraged trading. This means you are trading higher volumes than the balance of your account. The margin level dictates the required capital to hold a leveraged trade. Leveraged trading increases your opportunity to profit but also increases risk. Understanding these concepts is vital components to trading forex successfully.

Forex Margin and Leverage

Trading Concepts

Planning Your Forex Strategy

Today, the retail trader is able to design and implement custom trading systems and strategies without extensive resources and expertise. Now, planning your forex strategy is a relatively straightforward process. First and foremost, every powerful forex strategy begins with an idea.

Four Steps to Making Your First Trade in Forex

Select A Currency Pair

Depending upon the trading strategy, unique levels of volatility and liquidity may be required of a currency pairing. Given these considerations, a premier opportunity may be found in the majors, minors, or exotics.

Which currencies can I trade?

Buy or Sell?

Flexibility is a key perk of forex trading. Unlike securities, one is able to profit from either the buying or selling of currency pairs. This opens the door to a variety of strategic options on both the long and short sides of the market. So, are you bullish or bearish?

What are Bearish and Bullish Markets

When it comes to planning your forex strategy, there is one steadfast rule: if you can dream it, then it is possible. Given the advanced functionality of trading platforms such as’s web, mobile, and desktop applications, as well as MetaTrader4, putting your fully-customized strategy into action isn’t as far away as you may think.

Next: Managing Risk