Basic Trading Tips (Forex Beginners)

Forex trading is a highly complex activity. Here are some simple trading tips from FxPros.net:

Forex Trading Tip 1: “Know what you are trading”

The market behavior of all Forex pairs is not the same. Some currency pairs are much more volatile and trend more aggressively than others. Furthermore, currency pairs often trade within specific seasonal patterns. For example, during April, the British Pound against the US Dollar tends to appreciate more than 80% of the time.

» When to trade Forex

Table: Forex Currency Pairs & Volatility

Basic Concepts Behind Forex Trading

If you're new to Forex trading, the learning curve can seem steep, but don’t worry. With the right mindset and foundational knowledge, you can ease into it without unnecessary stress. Here’s a beginner-friendly guide to help you get started the right way.

1. Forex Trading Is Not a Get-Rich-Quick Scheme

First and foremost, Forex trading is not a shortcut to wealth. It requires discipline, planning, and emotional control. If you're entering the market expecting instant profits, you’re setting yourself up for disappointment. Real success comes with time and experience.

2. Understand the Market Structure

Forex is a global, decentralized market made up of many participants—banks, institutions, brokers, and individual traders. Each player’s influence is based on the size of their capital. As a retail trader, you're at the smaller end of the scale, so it’s important to understand how the "food chain" works in this industry.

3. Focus on Capital Preservation

One of the most common mistakes beginners make is chasing fast profits. Instead, your initial goal should be protecting your capital. Long-term trades are typically less risky and more forgiving, giving you time to learn while maintaining balance in your account.

Trading Forex Majors Calendar

The Forex majors are the most actively traded and liquid currency pairs in the global foreign exchange market. Collectively, they account for over 85% of the total daily trading volume, making them central to most trading strategies.

These pairs are favored by institutional and retail traders alike due to their:

• High liquidity
• Tight bid/ask spreads
• Reliable historical data

Such characteristics make Forex majors particularly suitable for scalping, intraday trading, and algorithmic strategies. 

Below is a comparative overview of the historical periodic returns for the seven major currency pairs over the period 2000–2018:

Table: Historical Returns of the 7 Forex Majors (2000–2018)

Source: G. Protonotarios (c) 2000-2018

Foreign Exchange Market Statistics 2000-2013

The Forex Market

The Forex (Foreign Exchange) market is a decentralized, over-the-counter (OTC) financial market where currencies are traded. Operating 24 hours a day through an electronic network of banks (ECNs), Forex is one of the most liquid and dynamic markets in the world. Daily trading volume is estimated to exceed $4 trillion, with the vast majority—approximately 90%—driven by speculative trading, primarily from day traders.

Structure of the Forex Market

The modern free-floating Forex system began in 1971 following the collapse of the Bretton Woods agreement. Online retail Forex trading gained momentum in the late 1990s with the advent of internet-based platforms. The Forex market operates continuously from Sunday at 5:00 PM EST to Friday at 4:00 PM EST, starting in the Asia-Pacific region and moving through the Middle East, Europe, and North America in a 24-hour cycle.

Forex Market Historical Volatility Research (2000–2013)

This study examines the historical volatility of the most actively traded currency pairs in the Forex market over a broad timeframe, from January 1st, 2000, to August 2013—a period spanning approximately 13.5 years.

• Data: Daily data 1/2000-8/2013
• Sample: EUR/USD | USD/JPY | USD/CAD | USD/CHF | GBP/USD | NZD/USD | AUD/USD

Measuring Historical Volatility

Volatility in the Forex market is assessed using models based on the Average True Range (ATR) indicator.

What is ATR (Average True Range)?

Developed by J. Welles Wilder and introduced in his 1978 book "New Concepts in Technical Trading Systems", the ATR is designed to measure market volatility by accounting for price gaps and daily trading ranges.

Wilder defined the True Range (TR) using two primary methods:

• Method 1: Current High – Current Low
• Method 2: Current High – Previous Close

Forex Trading Frequently Asked Questions (FAQ)

What Is the Foreign Exchange (Forex) Market?

The Foreign Exchange Market, or Forex, is the world’s largest and most liquid financial market, operating 24 hours a day, five days a week. It is a decentralized, over-the-counter market built on an Electronic Communications Network (ECN) that links banks and financial institutions globally.

Currencies are traded in pairs, and the average daily trading volume exceeds $5 trillion, making Forex larger than any stock market in the world.

What Is a Currency Pair?

A currency pair represents the exchange rate between two currencies. For example, EUR/USD shows how many U.S. dollars (USD) one euro (EUR) can buy.

• The first currency (EUR) is called the base currency

• The second currency (USD) is called the quote or counter currency

Common Currency Symbols:

• USD – US Dollar
• EUR – Euro
• GBP – British Pound Sterling
• JPY – Japanese Yen
• CHF – Swiss Franc
• AUD – Australian Dollar
• CAD – Canadian Dollar
• NZD – New Zealand Dollar

The most traded pairs—like EUR/USD, USD/JPY, and GBP/USD—are known as major pairs. These pairs are highly liquid and typically offer lower spreads, which is key for profitable trading.