Forex Basics: The 20-Minute Primer
Understand the essentials before you ever place a trade. Plain English, no jargon, no hype.
Why This Exists
Foreign exchange (forex) trading gets a bad reputation because of scams, fake “get rich quick” courses, and over-leveraged losses. This short guide gives you just enough to decide if forex is something you want to explore — and how to start safely if you do.
The Core Idea
- Currencies are traded in pairs (e.g., EUR/GBP, GBP/USD).
- Buying EUR/GBP = buying euros and selling pounds in one step.
- Prices move due to interest rates, economic data, and market sentiment.
- You profit if the pair moves in the direction you predicted.
Key Terms in Plain English
- Pip — smallest standard price move (usually 0.0001).
- Lot — how much currency you’re trading (micro lot = 1,000 units).
- Leverage — borrowing to make bigger trades; multiplies wins and losses.
- Spread — broker’s built-in cost (buy vs sell price).
- Stop-loss — automatic exit if price moves against you.
Step-by-Step: One Simple Setup
- Pick a trustworthy broker — FCA-regulated in the UK (IG, CMC Markets, Saxo, City Index). Avoid unregulated offshore platforms.
- Start with a demo account — trade with play money first to learn the platform.
- Choose one major pair — GBP/USD or EUR/USD (high liquidity, lower spreads).
- Decide risk per trade — never risk more than 1–2% of your account on a single trade.
- Place your first tiny real trade — use low leverage (1:5 or lower) until comfortable.
Smart Safety Rules
- If you don’t fully understand leverage, don’t use it.
- Keep trades small — focus on learning, not fast money.
- Avoid Telegram “signal groups” and guaranteed-win promises.
- Use a stop-loss on every trade.
- Record what you did and why (simple trading journal).
Free Learning Resources
- Babypips School of Pipsology — beginner friendly.
- FCA ScamSmart — check if a broker is legit.
- Broker demo accounts — risk-free practice.
Bottom line: forex isn’t a shortcut to riches, but it can be an interesting skill. Start tiny, stay regulated, keep risk low, and walk away if anyone promises easy money.