If you’re new to currency trading, mastering forex trading basics is your essential first step. The foreign exchange market is the world’s largest and most liquid financial market, and understanding how it works will help you build a strong foundation. In this beginner forex guide, you’ll learn what forex is, how currency pairs operate, and core concepts like pips, lots, leverage, and trading sessions.
Whether you’re trying to learn forex trading for the first time or looking for a quick forex trading tutorial, this complete guide is designed to simplify the journey.
Forex (foreign exchange) is the global marketplace for trading national currencies against one another. Currencies are always traded in pairs, such as EUR/USD or GBP/JPY. When you buy a currency pair, you’re buying the base currency and selling the quote currency.
Example:
If you buy EUR/USD, you’re betting that the euro will strengthen against the U.S. dollar.
If you sell EUR/USD, you’re expecting the euro to weaken against the dollar.
The forex market sees more than $7 trillion in daily volume and is decentralized—meaning it operates through global banks, institutions, and individual brokers rather than a centralized exchange.
Understanding Currency Pairs
Forex is always traded in pairs, which are categorized into three groups:
Type of Pair
Example
Description
Major Pairs
EUR/USD
Involve the U.S. dollar and another major currency
Minor Pairs
EUR/GBP
Pairs that don’t include the U.S. dollar
Exotic Pairs
USD/TRY
Involve a major and a developing country’s currency
Each pair has a base currency (first) and a quote currency (second). The exchange rate tells you how much of the quote currency is needed to buy one unit of the base currency.
What Are Pips?
A pip (short for percentage in point) is the smallest price movement in a currency pair.
For most pairs, 1 pip = 0.0001
For pairs with the Japanese yen, 1 pip = 0.01
Example:
If EUR/USD moves from 1.1000 to 1.1005, it increased by 5 pips.
Pips are crucial for calculating profit and loss in a trade. On a lot, 1 pip is typically worth $10.
How to Calculate Profit and Loss in Forex
Forex trading isn’t just about placing orders. It’s about understanding how those trades affect your account balance. Calculating profit and loss (P&L) helps you evaluate performance and refine your strategy.
Basic P&L Formula:
Profit/Loss = (Number of Pips Gained or Lost) × Pip Value × Lot Size
Example:
You buy 1 standard lot (100,000 units) of EUR/USD at 1.1000 and close at 1.1050.
That’s a 50-pip gain.
Pip value for a standard lot = $10.
50 pips × $10 = $500 profit
This formula works in reverse for losses. Keeping track of your P&L also helps you set stop-losses and take-profit levels more strategically.
What Are Lots?
In forex, trades are placed in units called lots, which standardize position sizes.
Lot Size
Units of Base Currency
Typical Pip Value (USD)
Standard
100,000
$10 per pip
Mini
10,000
$1 per pip
Micro
1,000
$0.10 per pip
Nano
100
$0.01 per pip
Beginners usually start with micro or mini lots to limit exposure while learning.
What Is Leverage?
Leverage allows you to control a larger position with a smaller amount of capital. It’s expressed as a ratio, such as 1:100 or 1:500.
Example:
With 1:100 leverage, a $100 deposit controls a $10,000 position.
This amplifies both profits and losses, so risk management is critical.
Most brokers like Trade 247 offer flexible leverage options on MT5, with built-in margin calculators to help manage exposure.
Forex Trading Sessions Explained
The forex market operates 24/5, but not all hours are equal in terms of volatility and liquidity. There are four main trading sessions:
Session
Major Markets
Time (GMT)
Key Features
Sydney
Australia
10 PM – 7 AM
Slow start, some AUD/NZD movement
Tokyo
Japan, Asia
12 AM – 9 AM
Active JPY pairs, overlaps with Sydney
London
UK, Europe
8 AM – 5 PM
High volatility, major market for EUR/GBP
New York
USA
1 PM – 10 PM
Strong USD activity, overlaps with London
Which Platform Should Beginners Use?
There are many platforms available, but MetaTrader 5 (MT5) stands out as the go-to platform for beginners and pros alike. It supports:
Real-time charts
Technical indicators
Economic calendars
One-click trading
Automated strategies (Expert Advisors)
Trade 247 is an SCA-regulated broker that offers MT5 with ultra-tight spreads, deep liquidity, and support for multiple account types. It’s the best trading platform to build your skills in a professional-grade environment.
Final Thoughts
Mastering forex trading basics lays the groundwork for long-term success in currency markets. By understanding pips, lots, leverage, and trading sessions, beginners can avoid common mistakes and trade with confidence.
Ready to start your trading journey? Trade 247 offers beginner-friendly access to MetaTrader 5, demo accounts, and a secure environment, all backed by SCA regulation. Whether you’re just getting started or already learning how to trade like a pro, you’ll have the tools you need to grow with confidence.
FAQs
Is forex trading good for beginners?
Yes, with proper education and risk management, forex offers flexible hours, low capital requirements, and high liquidity, making it beginner-friendly.
How much money do I need to start trading forex?
You can start with as little as $100, especially if your broker offers micro lot trading and high leverage. Start small and grow with experience.
Can I practice forex without real money?
Yes. Most platforms like MT5 offer demo accounts where you can practice using virtual funds under real market conditions.
What is the best time to trade forex?
The London–New York overlap (1 PM–5 PM GMT) is generally the most active and liquid time for most currency pairs.
Does Trade 247 offer beginner-friendly features?
Yes, Trade 247 is regulated by the SCA (Securities and Commodities Authority), ensuring a secure trading environment with professional support.
FAQs
What’s the easiest trading platform for beginners to use?
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MT5 is widely regarded as one of the most popular platforms for all types of traders due to its clean interface, straightforward functionality, and vast educational resources.
Is a demo account important for new traders?
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Yes. A demo account allows you to practice trading with virtual funds, helping you learn platform tools and trading strategies without risking real money.
Can I switch platforms after I’ve learned the basics?
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Absolutely. Many traders start with MT4 or cTrader, then upgrade to more advanced tools like MT5 or TradingView as they gain confidence and diversify their trading style.
What features should I look for in a beginner trading platform?
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Key features include a user-friendly dashboard, charting tools, risk management settings, educational guides, and broker support for account setup and troubleshooting.
Does Trade 247 offer beginner-friendly platforms?
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Yes. Trade 247 offers access to MT5 with all with demo modes, multilingual support, and a secure environment to help new traders succeed.
