Forex trading made simple - how to earn money

These are in my opinion the most used 50 terms, which should every good trader know: 1. 1. Ask price - is the price where the market will sell a specific currency pair from you  2. Bid price - is the price where the market will buy a specific currency pair from you 3. Spread -  is the difference between ask and bid price, varies from brokers, used for determining commissions. 4. Pip  - is the smallest movement in the market, 1 pip for EUR/USD = 0.0001, for yen pairs it is 0.01 5. Exchange rate  -    the value of one currency expressed in terms of the other. If for example USDJPY is 111. 5, then 1 dollar is worth 111.5 yens. 6. Leverage -   allows you to get to the position greater than your account is.  For instance if trader has 1 dollar and leverage is 200:1, he can leverage his position 200 times - he can trade 200 $ in total. The other 199$ are covered by bank or broker.  7. Margin - is the deposit required to open or maintain a position. 8. Base currency -

Forex Trading - also known as the foreign exchange market (FX) is a "place", where the currencies are exchanged. These currencies are traded, because people need to exchange currencies to conduct foreign trades or business. For example if you are living in the U.S. and you want to buy a chocolate from the Switzerland, you have to buy this product in euros, so it means that exchange from US dollar(USD)  to euros(EUR) is needed. The Forex market is traded between 10pm on Sunday and 10pm on Friday. Within this time frame it's active 24 hours every day, 5 days a week. The necessity or need of people to exchange currencies, because of globalisation and other aspects, is the primary reason, why the Forex market is one of the biggest markets in the world. The BIS(the Bank for International Settlements) concluded, that Forex market has a value of astonishing 4.9 trillion US dollars, so there is huge potential in making money. If you would have compared FX(Forex market)

A pip is the smallest movement in the price action. This movement is calculated through the spread difference - bid and ask price. For the most pairs one pip represents 0.0001,  for the JPY(yen) pairs it is 0.01, because of 3(2) digital value in comparison with other major currencies, which have 1 digital value. Example  For the EUR/USD the movement from 1.4000 to 1.4001 represents one pip For the USD/JPY the movement from 112.00 to 112.01 represents one pip The calculation of the pips comes in handy if we want to make a transaction, so we know how many lots we want to buy or sell. A Lot In general, a lot represents the standardized quantity of a financial instrument. 1 (standard) lot is 100.000 units of base currency. I would suggest using calculator, because it can be quite tricky to calculate. This calculator is my favorite one. How to calculate position size - very important for Forex trading! In trading it's really important to have risk and