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Forex basics

Knowing the basics of the forex market will give you a solid foundation where you can build your skills, trading strategies and even work towards a successful FX trading career – so let’s dive in!

What is Forex?

The forex market is recognised as the largest and most liquid financial market in the world. The average daily forex transaction is now estimated at around $5.1 trillion, according to the most recent Triennial Central Bank Survey of FX and OTC derivatives markets.

How to trade FX?​

Forex trading always involves a currency pair, so when you trade forex you’re effectively exchanging one currency for another. For example, if you trade long EUR/USD, you’re buying the EUR and selling the USD.

When can I trade Forex?

The global FX market is also known as a market that never sleeps. This is because forex markets operate on a 24-hour, 5-day cycle that operates in three major forex centres – i.e. Japan/Asia, UK/Europe and the US (North America). So, wherever you are in the world, you can trade forex almost any time of the day as long as you have access to an online trading platform and a reliable internet connection.

Learn more about forex trading in Forex 101: The Ultimate Guide to Forex Trading in 2020

Fx products available for you to trade

While there are hundreds of different trading products to choose from, most traders stick to five main categories:

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FX MAJORS

The world’s most commonly traded currencies (EUR/USD, USD/JPY, GBPUSD etc.)

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FX CROSSES

Currency trades that don’t involve the US dollar (EUR/CAD, EUR/GBP, GBPJPY etc.)

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EXOTICS

Currencies from emerging markets (Thai Baht, Turkish Lira etc.)

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COMMODITY BLOCS

A group of currencies closely linked to a commodity (CAD, NZD, AUD)

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SAFE HAVENS

Safe Havens: Currencies traditionally known for their stability (JPY, GBP, USD, EUR, CHF)

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The costs of forex trading

Trading doesn’t have to cost a lot – with the help of leverage you can trade Forex for as little as US$10. And with our transparent pricing, you’ll always know where you stand.

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What is leveraged trading?

Using leverage gives you full exposure to a trade even if you only have a small amount of capital to contribute. For example, applying leverage of 400:1 means you could use $1,000 to control $400,000 worth of trades. Just remember that the higher the leverage, the higher the risk.

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Why are spreads important?

In Forex trading the spread determines the price you’ll pay for your trade. Every trade consists of a buy (Bid) price and a sell (Ask) price, with the spread being the difference between the two. In general, the lower the spread the better the price will be.

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Are there any other costs?

Most fees and commissions on Axi accounts are either waived or covered by the broker. However, there are a few products that come with extra costs, for example “swap” or “rollover” fees on Futures trades. If you’re unsure, just check with us before you trade.

Learn more about trading costs

Risk management when trading forex

Like any other kind of trading, FX trading does carry risk. But by using some simple trade management strategies and tools, you can work to minimise risk and focus on opportunities.

Know your risk profile​

Are you a big risk taker, or a more careful and considered trader? Take some time to consider your general attitude to risk and use this to shape your trading strategy.

Leverage

While the use of leverage opens up the potential for large profits, it also increases the risk of outsized losses. The lower the leverage, the lower your risk.

Right-size your position​

Getting your trade sizes right has a big impact on your bottom line. Asking yourself how much can you can afford to lose will help determine position sizes that are appropriate for you.

Stop Losses​

Getting your trade sizes right has a big impact on your bottom line. Asking yourself how much can you can afford to lose will help determine position sizes that are appropriate for you.

Trading psychology​

Similar to knowing your risk profile, understanding your own psychology shapes the way you trade. Think about how you would deal with different situations, like large profits or losses, and prepare yourself mentally for those outcomes.
Learn more about managing your risk

Education you need to trade forex

The Forex market is a dynamic environment where there’s always something new to discover. To help you keep learning and improving, we offer access to extensive educational trading resources.

EDUCATIONAL RESOURCES
MARKET NEWS & UPDATES

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Warning: Spread betting and CFD trading both carry a high level of risk to your capital with the possibility of losing more than your initial investment. These products may not be suitable for all investors, and are not available to individuals under the age of 18. Please ensure that you are fully aware of the risks involved and refer to our Risk Warning. If necessary, seek independent financial advice. The Customer Agreement and Execution Policy available at www.axi.com/uk are important and should be reviewed prior to deciding whether to acquire, hold or dispose of Axi’s products. Axi is a trading name of Axi Financial Services (UK) Limited which is registered in England and Wales under number 6050593. Axi Financial Services (UK) Limited is authorised and regulated by the Financial Conduct Authority – Firm Reference Number 466201. Our registered address is 1 Finsbury Market, London EC2A 2BN.