Hello guys, My name is Alex Katsaros and I am the Product manager of cTrader. In this
video series I am going to teach you the basic and advanced concepts of forex trading, so
after you watch the hole series, you will learn to trade and think like a professional
trader. Here at Spotware the company behind cTrader we get compensated from your volume.
That's the reason we made this educational series because we want to help you learn how
to trade more successfully so you can grow your accounts. In this first video I am going
to teach you everything you need to know about the basics of forex trading. You're going
to learn what foreign exchange is, what a "pip" is, how to go long, how to go short
and what you're supposed to do when you begin your forex journey. So let's get started,
Forex means foreign exchange. Foreign exchange means to change your currency for another
countries currency. For example if you want to visit a foreign country for vacation, you
go to your local bank and you're changing your currency for notes of the country that
you are visiting. When you are doing that you are actually doing a foreign exchange
transaction. The foreign exchange market is the greatest market in the world. It has a
daily volume of around 4 trillion dollars. The main participants of the foreign exchange
market are global banks and their customers. People exchange money for any reason, like
commercial companies exchange money for hedging or for commercial activities or people exchange
money if they want to travel or for any other reason. However when you are using cTrader
which is a trading platform you are obviously not using it to exchange money for vacation.
What we are doing when using a trading platform is, we are doing something called "speculation".
The trading platform shows us the exchange rate between two currencies and what we are
doing is we are trying to speculate if the exchange rate is going to rise, or it's going
to fall, and then we're trading - do the necessary trade and if our speculation is correct we
win money. If our speculation is wrong we lose money. Let's go to cTrader and I am going
to show you exactly what I mean. You see here on the left we show the market watch. 3. You
see on the left cTrader shows the "Market Watch". The market watch shows you all the
currency pairs available for trading. Let's look closely to the first and most famous
pair the EUR versus USD. Let's open the information window. forex pair displays two currencies.
EUR USD means euro versus dollars. The first currency is called the base currency and the
second currency is called the quote currency. The exchange rate shows how many units of
QUOTE currency you can buy with one unit of base currency. In this example the exchange
rate is 1.37735 so one EUR can buy 1.377 dollars. 4. However, for every currency pair we see
two exchange rates, as you can see here. Why is that? The reason for that is that is the
way banks and brokers make money from the customers who trade FOREX. They will buy a
currency from you at a slightly lower price and they will sell a currency to you in a
slightly higher price and thus make the difference between the rate to buy and the rate to sell.
The difference between the price to buy and sell a currency pair is called the "Spread".
We can see the spread here in MarketWatch for EURUSD it's 0.9 pips. I am going to explain
to you what "Pips" are in a bit. 5. Ok so you learned what forex is, and we learned
what the exchange rate is and what the spread is. What are you supposed to do now in order
to make money? In the middle of the screen here we see the EURUSD chart. . The chart
shows us the current exchange rate, and the past exchange rate of the symbol. The reason
we need the past exchange rates is because traders use a technique called "technical
analysis" which helps them speculate on the future exchange rate using the information
that we see from the past of the chart. We also use various tools like the tools we see
here in Line Studies Tool bar. In order to understand more about technical analysis you
can see see videos 2 and 8 of the series.6. The basics of forex trading are rather simple.
You see the exchange rate between two currencies on your chart. If you believe that the exchange
rate is going to go up, like here the chart is going to go up, then you buy the currency
pair. If you believe that the exchange rate is going to go down, if you believe that this
chart is going to continue going down, then you sell the currency pair. The chart goes
up if the base currency is gaining strength and the chart goes down if the quote currency
is gaining strength. There are two conveniently placed QuickTrade buttons in the top of the
chart that do exactly that. Pressing the buy button, after you select your volume, I am
going to show you how you select your volume in a bit, will buy the currency pair. So if
we click the button, see here? I have a position, I have bought the currency pair, you buy the
currency pair on the exchange rate above the buy button, which is called the ask price,
and it's represented on the chart by the blue line. If we believe that the exchange rate
is going to go down then you sell the currency pair by using the sell button, with the exchange
rate above the sell button and you sell on the red price that is called the "bid" price.
Those two prices together are called the "Spot Price". Those prices together are called the
spot price. IF you are correct in your speculation you will make a profit, if you are wrong you
will make a loss. Remember we said you need to select your trade volume? How exactly are
you going to do that? Why are the numbers in the drop down here so big even tho my account
balance is very small in comparison It's just 11.000? ? The reason is that Forex is a leveraged
financial product. That means that you control a bigger amount of money than the money in
your account balance in order to make profits faster. For more information on leverage you
should watch episode 6 of the series. If leverage didn't exist you would make money very slowly
unless your account balance was very big. So which one of these volumes should you choose?
The volume of your trade depends on how much of your account balance you want to risk with
your trade, how much money you want to make, in combination with how much you expect the
exchange rate to move in order for you win or lose those amounts. This sounds a bit complicated
but it really isn't. Let me show you an example by using two different volumes. First you
select 100k volume and we buy at this rate. We believe that the exchange rate is going
to go up, so we move that little TP or "Take Profit" box to the place that we believe that
the exchange rate is going to go. So what is that box? This is called a take profit,
and it means that when the price reaches that rate, your position will close and you will
get the money. You must remember that in order to make money when trading you need two trades,
one that opens the position and one trade that closes the position and gives you the
money. Of course things don't always go your way so there is the opposite box and order
called a stop loss. You move this box to the exchange rate that is the lowest you can afford
to lose. Here we are using a volume of 100.000. Let's look at the numbers more closely now.
Let's move our stop loss here and our take profit here. We're using a volume of 100k
and we see that we are going to lose 222 EUR and we're going to win 224 EUR. Now let's
close this position, and let's open the same position, with one million volume. Let's put
our stop loss and take profit on exactly the same places. Now you see that we are going
to lose 2236 EUR and we're going to win 2214 EUR. That's because the volume now is a lot
bigger, because it's one million and the previous volume was 100.000. That's the effect of trade
volume in your trading and that's why it's important to select correct volume when creating
an order. In Risk Management which is the episode 6 we explain exactly how much you
must be risking with each one of your trades. 10. Ok so how do we calculate the volume that
you are supposed to be trading with? Let's close this position here. In order to calculate
the volume you need to understand the concept of a "Pip". So what is a "Pip"? The concept
of the pip confuses many novice traders. The pip digit is the fourth decimal digit (0.0001)
in all symbols besides Yen symbols, and the second decimal digit (0.01) in all symbols
that have Yen as their quote currency. So why do traders use pip? Why don't they talk
about money? As I talked about before you see that every trade has a different stop
loss a different take profit and different volume so if one trader will say to another
that he made 1000 euros from a trade, that doesn't mean that the trade was a good trade
or a bad trade or a mediocre trade. However if the trader will say to another trader that
he made 50 pips from a trade, the other trader can understand exactly how much of the exchange
rate he got for his own benefit. So let's go to cTrader where I am going to show you
using an example how - what exactly I meant with a pip. So let's create a new order here
with 100.000. It's a buy order, we see that the exchange rate that we have entered, the
"Entry Rate" is 1.37703. Let's put our take profit at exactly 1.37803. If we subtract
the entry price from our take profit we're going to see the difference is 0.0010 so that
means that the difference is 10 pips. You see here it says "Pips 10". The reason is
that like we said before the pip is the fourth decimal digit and that means that one pip
equals to 0.0001. So 0.0010 means 10 pips (0.0001 x 10). We said before that the spread
between the EURUSD here is, now it's one pip. So that's what one pip means, it means that
the difference between the ask and the bid price is going to be one in the fourth decimal
digit. Great! Now we know what a pip is, how does this help us calculate our order's
volume? In forex the volume you select depends on how much money you want to make or risk,
and how many pips you expect to win or lose. So by knowing or calculating the profit per
pip for each volume, you know how much volume to choose. The profit per pip for one pip
of EUR USD with a trade volume of 10.000 as we see here on the combobox, is standard and
it's 1 USD, by knowing that you can understand how much profit per pip you can make with
any volume. If you trade 20.000 EUR USD the profit per pip is 2 USD, if you trade 100.000
it's 10USD if you trade 1 million EURUSD it's 100 USD and so on. When trading forex
the volume you select is always the volume of base currency and your profit or loss per
pip is always expressed in quote currency. Let's use another example let's use, USDCHF
let's open a new chart here, so if we trade 10 000 here, we trade 10 000 USD and our profit
per 10 000 USD is 1 CHF. In cTrader your profit and loss here is conveniently expressed always
in your account's currency so the profits are converted and you understand exactly how
much you win or lose. Now that we have this information let's try again. My account is
My account is USD 10.000 and I want to risk 100 usd. However I want to make a profit of
200 USD. I believe the exchange rate is going to go 100 pips low and I want to risk 100
pips. Based on the information I have given you already you know that if I want to risk
100 USD with 100 pips, I want to risk 1 USD per pip! We already know that the trade volume
that risks 1 USD per pip is 10.000, because I explained that before. So let's select 10 000
Let's put first, let's create the order, so we have our entry rate here, so now we're
going to put our risk, our stop loss is at 100 pips because remember we wanted to risk
100 pips, so I am going to move here this Stop Loss until I see the pips here say 100.
And you see where it says 100 pips I am risking exactly 100 dollars, like I wanted to. Now
we say that we want to make 200 dollars, so let's move the take profit, to 200 pips, where
this number says 200, and we're going to make exactly 200 dollars. So now you know exactly
how to create an order and how much volume you are supposed to choose and you also know
what a stop loss and a take profit is. You can create an order from the QuickTrade buttons,
or you can create an order using the order screens, which the icon is found here and
in the symbol you want to trade. After your order is filled a position appears in the
TradeWatch as we have seen before, you also see your position in the chart. In the end
of your position you see in your account currency, how much your position is winning or losing
in any given time. Remember that you will not add this number, or subtract this number
from your balance until your position is closed, either by a stop loss or a take profit, but
if you want to close your position at any time before it reaches those levels you can
close it using the close button. So If I click the close button now it's going to close this
position. And that position had a loss of three euros so I took the loss in my balance.
The QuickTrade button creates a Market Order, a Market order means that you request to buy
or sell a specific volume, but you will not send to the server a specific rate. You want
to request this volume, to the best possible price. The exchange rate that you're going
to get that is shown above your buy or sell button is not guaranteed when creating a market
order. You will get the best exchange rate at the moment the order reaches your server.
If you want a guaranteed exchange rate you can use a "Limit" order. Let's go to cTrader
where I am going to show you exactly how to create a Limit Order. You can create a
limit order by right clicking on the rate you want in the chart, so If I want to create
a limit order on this rate, I can right click and select "Sell Limit". So If I want to do
a sell limit on this level I am going to press sell and you can also pre-set your stop loss
and take profit, like we have shown before with a market order. If you want to trade
a market order, where the exchange rate reaches a specific price that you have chosen in the
future, you use a stop order. You can right click and select sell stop, do the same thing,
sell, now we are using a stop order. We can again pre-set stop loss and take profit, you
can also create a limit and stop order using an order screen. Just select limit or stop
order. You can create a limit order on the best prices, better prices than the current
market price so if I buy here I can create a limit order from here which is the spot
price as we explained before, and below. If I want to create an order that's going to
be a worse price, then I'm going to use a stop order and it's going to be from the exchange
rate, the spot price and above. The reason why this happens is because we want to protect
you. If you want to create a Limit order, so you request this specific rate which is
a worse rate, than the current spot price, so you are buying higher, we want to protect
you because someone might give you this rate and you will lose money for no reason. So
let's quickly go through the platform so you understand the rest of the tools. In the right
here you see the Line Studies Toolbar and this helps you trade using, lines, trend lines,
support and resistance lines, and other tools. You can check out the video support, resistance
and trend line trading for more information. It's a very popular trading method. On the
top right you see your cTrader settings where you can set a lot of things, like your application
layout and your QuickTrade settings and other stuff. Inside the chart you see the chart
controls where you add your technical indicators or you can select your timeframe for your
chart. You can check episode 11 multi time frame trading to understand what a time-frames
is. In this video I explained to you the basics of forex trading so by now what the spread
is, what a pip is you know how to go long, how to go short, you also know how , what
to do in order to make money, how to enter an order, and how to choose your volume. This
may be the basics of Forex trading but this is what you are actually will be doing all
the time, you buy and you sell, and you create orders, and then you close your positions.
However in order to be successful in your trading and in order to make money you need
to be correct when you're speculating, that's the reason why the series does not end here.
In the rest of the videos you're going to learn how to have a correct trading system,
how to use technical analysis in order to speculate the market correctly, you're also
going to know correct, forex risk management, how much you're supposed to risk and how much
you are supposed to win with each trade. In the next video we're going to talk about Technical
and Fundamental analysis , in the following videos we're going to talk about Risk Management,
Trading Psychology, specific technical analysis tools, multiple time frame trading and a lot
of advanced concepts. So if you liked this video don't forget to subscribe and if you
want share it with your friends, thanks for watching.