To better understand how Forex works we have to first understand the language of Forex. From Conversion Rates, Pips, Base Currencies and Quote Currencies. If you haven’t read the previous article ‘How to make money through Forex – For Complete Beginners‘ then you’ll be clueless https://www.nairaland.com/4998300/how-make-money-through-foreign of what I’m talking about in this article.

Before I continue, I would like to advise that you buy a reliable netbook and a high end smartphone to install Forex Trading Platforms in order to keep track of your investments.

How Forex Transactions Are Quoted
The Forex Transaction System (FTS) involves TWO currencies at all times. These two currencies are added to your portfolio respectively in base currency vs quote currency. The base currency is quoted as a unit equivalent to the exchange rate of the quote currency. So for example, let’s say you have the Euro as your base and the United States Dollar as the quote, the Forex Market will state this as EUR/USD. The unit equivalent will be after an equal sign like this : EUR/USD=1.2892. This means that for every 1 Euro purchased, you payed 1.2892. To further simplify things, if you bought €10000.00 you had to pay $12892.00 and you are praying the Dollar Weakens and the Euro strengthens for a profit.

Each Forex transaction is completed in separate contracts called “lots”. To simplify this, just memorize the phrase ” lots of money”. The typical size of a “lot” is 100,000 units which means if you acquire a typical sized contract, you will be able to control 100,000 units worth of base currency.

Each contract is subdivided into “pips” and pips are used to pertain the minimum price increment. Standard contracts have a pip value of $10. DO NOT WORRY MUCH, you can signup with ForexTime or XM Traders who allow trading from as little $1 for beginners, some even less. In Forex you are not obligated to purchase currency, so you can trade it at a later time.
Leverage

Leverage in the Forex Market is sort of money you do not have. You can choose the kind of leverage you desire when signing up for a Forex Trading Account. Usually the leverage system is quoted in ratios. For example 1:100 would mean, for a $1000 minimum deposit, you would multiply the currency by 100. If you know basic maths, if you multiply 1:100 on both sides by $1000 you would get a conversion of $1,000:$100,000. I personally recommend a 1:1 leverage if your broker supports it, mainly because this can fool you into thinking you have tons of money but in reality it’s just $1000. If you were to invest $1, the system fools you into believing you have $100 on the 1:100 ratio. And upon withdrawal guess what happens, you see a ridiculous $0.98 deposit in your account after deductions, but you thought you had $100 right?

Luckily for you there are ways of practicing Forex trading. You sign up for a demo account at ForexTime ( https://twitter.com/bankyfestus/status/1091643455405740032?s=21)and XM Traders. This Demo account has initial capital in it already and the markets flactuate in the same matter as real ones do. This is ideal if you want to understand more before jumping into Forex all clueless.

The reason I quoted ForexTime and XM Traders is because they have a good reputation then the others in the Forex Market System. Whether you choose them or whether you Google for other alternatives, I just hope you won’t have troubles with your Forex Trading Venture.
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