Forex is one of the most popular asset classes among investors, but it can seem confusing at first glance. Recap everything you have learned on the forex course below.
After completing the forex course, you should have a good understanding of what forex is and how it works. You will understand that forex is an abbreviation of the words “foreign exchange,” and that it refers to the trading of currency pairs. Traders try to take advantage of the price differences between the two currencies, as well as the continuously moving exchange rates.
What are currency pairs?
You should know that currency pairs are financial instruments made up of two distinct currencies that are traded against one another. For example, in the case of GBPUSD, traders “buy” the first currency of the ticker (Great British pound) and “sell” the second (US dollar).
You should also understand that there are different types of currency pairs:
| Currency Pair | Examples | Additional Information |
|---|---|---|
| Major | EURUSD USDJPY GBPUSD USDCHF | All major pairs include the US dollar. |
| Minor | EURGBP GBPJPY EURJPY | All minor pairs contain at least one of the world’s main currencies, excluding the US dollar. |
| Exotic | USDRUB USDNOK USDSEK | All exotic pairs contain a currency with a high trade volume and a currency with a smaller trade volume. |
Tip: EURUSD is the world’s most traded currency pair.
What are the most popular forex trading strategies?
You should have also learned about the differences between some of the most popular forex strategies:
- Day trading involves closing all positions at the end of the trading session.
- Swing trading involves buying the dips and selling the top of a price move.
- Position trading involves using fundamental analysis to enter medium- to long-term positions.
What is forex volatility?
After completing the forex course, it is essential that you understand the importance of volatility in the forex market and how it can impact your trades. Forex volatility is calculated using historical price data, and it measures the extent that the price of a currency pair moves over a period of time. Volatility indicators, such as moving averages, bollinger bands and the Keltner Channel, can all be used to measure and demonstrate volatility and price deviation.
What are the risks of trading forex?
Finally, you should also know how to trade forex and understand the risks involved with doing so. As with any asset class, making money is not guaranteed when trading forex. Remember, using leverage to trade forex has the potential to magnify both profits and losses!
Now that you have finished the forex course, either revisit the course or test your new knowledge!
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This information is for educational purposes only and should not be taken as investment advice, personal recommendation, or an offer of, or solicitation to, buy or sell any financial instruments. This material has been prepared without regard to any particular investment objectives or financial situation and has not been prepared in accordance with the legal and regulatory requirements to promote independent research. Any references to past performance of a financial instrument, index or a packaged investment product are not, and should not be taken as a reliable indicator of future results. eToro makes no representation and assumes no liability as to the accuracy or completeness of the content of this guide. Make sure you understand the risks involved in trading before committing any capital. Never risk more than you are prepared to lose.
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