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Basic to Advance

The document provides an overview of Forex trading, explaining its definition, major participants, and basic concepts such as currency pairs, pips, and spreads. It highlights the role of various market participants including banks, financial institutions, corporations, and retail traders. Additionally, it discusses the mechanics of Forex trading and the function of Forex brokers in facilitating transactions.

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19 views

Basic to Advance

The document provides an overview of Forex trading, explaining its definition, major participants, and basic concepts such as currency pairs, pips, and spreads. It highlights the role of various market participants including banks, financial institutions, corporations, and retail traders. Additionally, it discusses the mechanics of Forex trading and the function of Forex brokers in facilitating transactions.

Uploaded by

mughalsargodha444
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Basic to Advance

Market Structure
Presented By:
Mr. Naveed Akram {Senior Technical & Fundamental Analyst}
Basics of Forex Trading Part 1

 Overview of the Forex Market


 Definition
 Major Participants
 Key Forex Market Sessions
 Basics of Currency Pairs
 Major, minor, and exotic pairs
 Base and quote currencies
 Pips
 Spreads
 Mechanics of Forex Trading
 Forex Brokers
 Trading Platforms
 Order Types
Definition of Forex Trading

 Forex trading, or foreign exchange trading, is the decentralized global


marketplace for buying and selling currencies. In this financial
market, participants, ranging from individual traders to large financial
institutions, engage in the exchange of one currency for another with
the aim of making profit. The forex market operates 24 hours a day,
five days a week, and it is the largest and most liquid financial market
in the world.
 Traders aim to profit from the fluctuations in exchange rates.
 We make money in FX Trading by basic principle of buying cheaper
and selling at expensive rate
Major Participants
 Banks
 Central Banks : Central banks are key players in the forex market as they formulate and implement
monetary policies. They may intervene in the market to stabilize or influence their national currency’s value.
 Commercial Banks : Commercial banks engage in forex transactions for themselves and their clients.
They facilitate currency trading, provide liquidity, and act as market makers.

 Financial institutions:
 Investment Banks: Investment banks participate in forex trading for speculative and hedging purposes.
They also facilitate large transactions for institutional clients.
 Hedge Funds : Hedge funds engage in forex trading to seek profit from currency price movements. They
often employ sophisticated trading strategies to generate returns.
 Corporations:
 Multinational corporations engage in forex markets to manage currency risk associated with international
trade and business operations. They use the forex market to hedge against potential currency fluctuations.
 Retail Traders:
 Individual traders, known as retail traders, participate in the forex market through online brokers. They
trade currency for speculation or investment purposes, often using leverage to amplify their trading
positions.
Basics of Currency Pairs

 Currency Pair Definition


 A currency pair consists of two currencies quoted in relation to each other. They
first currency in the pair is the base currency, and the second is the quote
currency. The value of the currency pair shows how much of the quote currency
is needed to purchase one unit of the base currency.
 Base and Quote Currencies:
 Thebase currency is the currency you are buying or selling, and the quote
currency is the currency in which the transaction is quoted. For example, in the
EUR/USD pair, the Euro{EUR} is the base currency, and the U.S. Dollar {USD} is the
quote currency
MAJOR, MINOR and EXOTIC PAIRS
WHAT IS Pip

 A “pip” stands for “percentage in points” or “price interest point” and is a


standardized unit of movement in the exchange rate of a currency pair in
the forex market. It is a measure of the change in value between two
currencies. Pips are typically used to express the price movements of
currency pairs, especially for quoting exchange rates.
 In most currency pairs, the pip is the smallest price move that can be
observed in the exchange rate. The majority of currency pairs are quoted
to four decimal places, and in this context, a pip is usually the last
decimal place. For example:
 If the EUR/USD moves from 1.1200 to 1.1201, it has moved one pip
 If the USD/JPY moves from 110.50 to 110.51, it has also moved one pip
 If the XAU/USD moves from 2730.100 to 2730.200, it has moved one pip
Spread in Forex Trading

 In Fx trading, the “spread” refers to the difference between the buying {bid} and selling {ask}
prices of a currency pair. It represents the cost of executing a trade and is typically measured in
pips. The spread is one of the primary ways in which brokers make money in the forex market.
 Here’s a breakdown of the components of the spread:
 Bid Price
 The bid price is the price at which a trader can sell a currency pair. It is the lower of the two
prices displayed for a currency pair.
 Ask Price
 The ask price is the price at which a trader can buy a currency pair. It is the higher of the two
prices displayed of currency pair.
 Spread
 The spread is the difference between the ask and bid prices.
 The spread is measured in pips. For example, if the EUR/USD currency pair has a bid price of
1.1200 and an ask price of 1.1205, the spread is 5 pips.
Mechanics of Forex Trading

 Forex Brokers

 A forex broker is an intermediary or a financial institution that


facilitates the buying and selling of currencies on the foreign
exchange {forex} market. Forex brokers provide a platform for
traders, whether institutional or retail, to access the forex market and
execute trades,
Any Question

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