FX-SNIPER PRESENTS

Date 29th April, 2023.

Topics • Introduction to Forex

• Currency Pairs/Currencies
• Forex Terminology

What is Forex?
The word Forex stands for, “Foreign Exchange Market” which is usually known as FX is the
largest financial market in the world and it is the world’s biggest and most popular market, with
over 5 trillion USD worth of trades placed every day.

Although forex trading happens mostly online on different trading platforms, you’ve most likely
made a face-to-face forex transaction a few times in your life too. For example, when you travel
to another country, say the United States from Nigeria, you need to convert your home country’s
currency (Naira) into USD. When you do this, the exchange rate between the two currencies
determines the amount in USD you get for your Naira. The exchange rate fluctuates continuously
and is based on the supply and demand of the currencies.

In simple terms, forex trading means buying one currency and selling another at the same time;
this is why you always see them quoted in pairs, this is referred to as Currency Pairing. For
example, EUR/USD and GBP/USD. The first currency in the pair is the one you are buying, and
the second is the one you are selling.

The forex market is open round the clock on weekdays, giving you even more opportunities to
trade international currency pairs and take advantage of their price movements. Thanks to the
business hours of forex exchanges across international time zones, at least one region is
operating at any point during the week.

The four major exchanges around the world that start and end the trading day are Sydney, Tokyo,
London, and New York — with these exchanges, forex trading starts at 9:00 pm (GMT) on
Sunday and ends at 9:00 pm (GMT) on Friday.

LETS DIVE INTO CURRENCYS ABBREVIATIONS AND PAIRS

In the financial markets, almost all assets carry an associated abbreviation. For example, you
may see the company Amazon abbreviated as “AMZN” in the stock markets, or you may see the
metal Gold abbreviated as “XAU” in the commodity markets. The same principle applies to the
foreign exchange markets. In the world of forex, all currencies are abbreviated and you have to
know and memorize these abbreviations. We have listed some examples below:

• EUR – Euro
• USD – U.S. Dollar
• NGN – Nigeria Naira
• CAD – Canadian Dollar
• JPY – Japanese Yen
• GBP – Great British Pound
• AUD – Australian Dollar
• CHF – Swiss France
• NZD – New Zealand Dollar
• MXN – Mexican Peso

You will notice that the first two letters in the currency abbreviate tend to stand for the country
that the currency is associated with, and the third letter typically stands for the name of the
currency itself though this may not always apply.

• Example: USD – The “US” stands for United States and the “D” stands for Dollar.
• Example: JPY – The “JP” stands for Japan and the “Y” stands for Yen.
• Example: GBP – The “GB” stands for Great Britain and the “P” stands for Pound.

Additionally, experienced traders who are fluent in forex terminology will frequently abbreviate
a currency pair using the first letter of each pair. For example, EUR/USD will be referred to as
simply EU or USD/JPY will be referred to as simply UJ.

TYPES OF CURRENCY PAIRS

There are three types of currency pairs:

• Major pairs — the world’s most widely traded currencies paired, e.g. GBP/USD or
EUR/GBP
• Minor pairs — less liquid currency pairs, e.g. NZD/USD or AUD/CAD
• Exotic pairs — one major currency paired with an emerging economy’s currency, e.g.
EUR/HKD

The image below are few and most common example provided by most brokers:
FOREX TERMINOLOGIES

Margin: Margin is the amount of money needed to open or maintain an open position. Think of
it as collateral given to a financial institution to ensure you have adequate equity to cover your
position. It is also there to act as a buffer to offset any losses. Margin is simply the money you
deposit to trade with.

Margin Call: A margin call occurs when the broker notifies the account holder that its margin
deposits have fallen below the required minimum level because an open position has moved
against the trader

Broker: A forex broker is a financial services company that provides traders access to a platform
for buying and selling foreign currencies. Opening a forex trading account these days is quite
simple and can be done online. Before trading, the forex broker will require a customer to
deposit money into the new account as collateral.

Brokers also provide leverage to customers so they can trade larger amounts than they have on
deposit. Depending on the country the trader is trading from, that leverage can be 30 to 400
times the amount available in the trading account. Our recommended broker is at exness, click
the link below and sign up https://one.exness-track.com/a/s0sxd2lh60.

Leverage: Leverage involves borrowing a certain amount of the money needed to invest in
something. In the case of forex, money is usually borrowed from a broker. In the foreign
exchange markets, leverage is commonly as high as 100:1. This means that for every $1,000 in
your account, you can trade up to $100,000 in value. Many traders believe the reason that forex
market makers offer such high leverage is that leverage is a function of risk. They know that if
the account is properly managed, the risk will also be very manageable, or else they would not
offer the leverage.

Bid/Ask Price and Spread: All Forex quotes are quoted with a two-way price that is the Bid
and Ask price. The Bid Price is the price that the dealer is willing to pay for the base currency in
exchange for the quote currency. This Bid price will also represent your selling price as a trader.
The Ask (also known as Offer) price is the price that the dealer will sell the base currency for in
exchange for the quote currency. This also means that the Ask price is the price that you will pay
for the base currency. As such, the Ask Price will always be higher than the Bid price. The
Spread is the difference between the Ask Price and Bid Price (or 3 pips in the example below:
1.3238 – 1.3235).

BUYING & SELLING: You may hear the terminology “long” and “short” used in trading when
discussing trade positions. The term “long” means that you are in a buy position on a certain
currency pair, and the term “short” means that you are in a sell position on a certain currency
pair.

Market Conditions: When discussing market environment, you may hear the terms “bullish”
and “bearish”. A bullish market refers to a market that is rising or increasing in price. A bearish
market refers to a market that is falling or decreasing in price. These terms were originally
attributed to the financial markets as metaphors for how the different animals attack. The bull
will thrust its horns up into the air representing a rise or increase, and the bear will swipe and
maul in a downwards fashion when attacking representing a fall or decrease.
Volatility and Liquidity: In reference to describing how much price is moving, the term
“volatility” is used. A highly volatile market would consist of sharp, fast changes in the
exchange rate for a currency pair. Likewise, in a market with low volatility we would expect to
find price consolidating and not changing very much. The enemy of volatility is “liquidity”.
Liquidity is simply a fancy term for the amount of trade volume in a given market at a given
time. Markets that have more liquidity have more participants and therefore more orders being
placed in either direction. This means that volatility will be lower because having many buyers
and sellers pushing price back and forth eliminates the ability for price to rise or fall too fast and
hard at any given time. Most pairs tends to be more volatile according to the trading session. For
instance GBPUSD is more volatile during the London Session.

PIP: A common term you’ll hear in the trading world is “pips”. A pip is defined as the smallest
possible change of an exchange price. Pips are very important because you will be calculating
them for each trade that you partake in. The exchange rate for any given currency pair may be
expressed using several different decimal places, so it’s important to note that pips are almost
always calculated without using the last decimal position. The last decimal position of price is a
fraction of a pip, or a “pipette”. Let’s look at an example:

Question: Let’s say you are analyzing the EUR/NZD cross currency pair and you note that the
current exchange rate is 120.325. You believe price will move up to 120.789. If you take this
trade and it wins, how many pips will you have caught?

Answer: Remember, pips are usually calculated without using the last decimal point. So, you
have 120.789 (the 9 is a fraction of a pip) – 120.325 (the 5 is a fraction of a pip) which will give
you a total of 46.4 pips caught.

Lot and Lot Size: In trading, the term “lot size” is used to describe just how much of an asset
you are trading at any given time. We have broken down the various lot size descriptions below:

• Standard Lot (1.0) = 100,000 units of currency. In general, each pip gained or lost when
trading a standard lot is equivalent to $10.
• Mini Lot (0.1) = 10,000 units of currency. In general, each pip gained or lost when
trading a mini lot is equivalent to $1.
 • Micro Lot (0.01) = 1,000 units of currency. In general, each pip gained or lost when
trading a micro lot is equivalent to $0.10.

Market order: A Market Order, sometimes known as an “unrestricted order”, is an order to buy
or sell at the best available price. They can be used for exiting or entering a trade. For example,
let say EUR/USD is currently trading at 1.4030 and you’d like to buy (go Long) this pair. If you
place a market order you will enter the market trying to get that 1.4030 price but you are telling
the broker your priority is not on price, but on getting filled and to get you at the “best available
price”.

NOTE: Market orders does not guarantee you will get the quoted price.

Limit Order: A Limit Order is an order placed with a broker to Buy or Sell a set number of
shares at a specified price “or better”. They can be used to buy currencies below the market price
or sell currencies above the market price. For example, In the case of buying, when the market
falls to your limit order price, your order is executed. Conversely, in the case of selling, your
order is executed when the market rises to your limit order price. By using a limit order you can
ensure there is no slippage, unlike a market order. Example: EUR/USD is currently trading at 1.
4030. You want to go long if the price reaches 1.4010. You can either choose to sit in front of
your monitor and wait for it to hit 1.4010 (at which point you would click a Buy market order),
or you can set a Buy Limit order at 1.4010 (and be able to walk away from your computer)

NOTE: Buy Limits are BELOW the current market price. Sell Limits are ABOVE the current
market price.

Stop Order: A Stop Order is an order placed with a broker to buy or sell a currency “at market”
when it reaches a pre-determined price. It is designed to limit a trader’s loss on a currency
position, or for more advanced order entry techniques, possibly used to enter into a position.

There are other types but this are the most used and most common.
THANK YOU AND SEE YOU IN THE NEXT
LESSON

QUESTION TIME??