Beginner trading questions, answered simply
The short answer first. Then the free lesson, word and calculator that go deeper.
Forex basics
- What is forex trading?Forex trading means swapping one currency for another, like US dollars for euros, and hoping the price changes in your favor before you swap back.
- What is a pip in forex?A pip is the small step a currency price moves. For most pairs it is the fourth number after the dot (0.0001). For yen pairs it is the second (0.01).
- What is a lot in forex?A lot is the size of your trade. A standard lot is 100,000 units of a currency, a mini lot is 10,000 and a micro lot is 1,000.
- What is the spread in forex trading?The spread is the small gap between the price you can buy at and the price you can sell at. It is a cost you pay on every trade.
- Why do currency prices go up and down?Prices move because of supply and demand. When more people want to buy a currency than sell it, the price goes up. When more want to sell, it goes down.
- When is the forex market open?The forex market is open 24 hours a day, five days a week. It opens Sunday evening and closes Friday evening, New York time.
- What is the best free way to learn forex?Use a free course that goes step by step and teaches risk early, test yourself after each lesson, and practice on a demo account with pretend money before you ever use real money.
Reading charts
- How do you read a candlestick chart?Each candle shows four prices for one slice of time: where price opened, the highest it went, the lowest it went and where it closed.
- What chart timeframe should a beginner use?There is no one right timeframe, but slower charts like the 4-hour or daily move more calmly and give you more time to think.
- What is support and resistance?Support is a price area where falling prices tend to stop because buyers step in. Resistance is an area where rising prices tend to stall because sellers step in.
- What is a trend in trading?An uptrend is a series of higher highs and higher lows. A downtrend is a series of lower highs and lower lows. Anything else is a range.
Risk and money
- How much should I risk on one trade?Many trading teachers suggest risking a small, fixed slice of your account on each trade, often 1% or less, so a losing streak cannot wipe you out.
- What is a stop loss?A stop loss is an order that closes your trade at a price you pick ahead of time, so a losing trade stops at a size you planned.
- What is leverage in forex?Leverage lets you control a big trade with a small deposit. It makes wins bigger and losses bigger by the same amount.
- How do I calculate position size?Divide the money you are willing to lose by the size of your stop in pips. That gives you how much each pip should be worth, which tells you the lot size.
Indicators and tools
- What is RSI and how do you read it?RSI, the Relative Strength Index, is a line from 0 to 100 that shows how strong recent up moves were compared with recent down moves.
- What is a moving average?A moving average is a line that shows the average price over the last few candles. It smooths out the wiggles so the trend is easier to see.
- What is price action trading?Price action trading means reading the chart itself, its candles, trends and levels, instead of relying on indicators.
Practice habits
- Should I practice on a demo account first?Yes. A demo account uses pretend money on real prices, so you can learn the buttons, test your plan and make mistakes for free.
- What is a trading journal and why keep one?A trading journal is a simple log of every trade: why you took it, how it went and what you felt. It shows you patterns you cannot see in the moment.
Brokers and starting out
- How do I choose a forex broker?Check who regulates the broker, which company you would actually sign up with, what every trade costs and how withdrawals work, before you send any money.
- How much money do I need to start trading forex?You can start learning and practicing with no money at all on a demo account. For a live account, what matters most is risking only money you can afford to lose.
- Can you get rich trading forex?Most people who trade leveraged products lose money. In Europe and the UK, brokers must show the share of their retail accounts that lose money, and it is often more than 70%.
Education only, not financial advice. Trading involves risk of loss.