Introduction to Forex Trading
The foreign exchange market (forex or FX) is the largest and most liquid financial market in the world, with daily trading volume exceeding $7.5 trillion. Unlike stock markets with set hours, forex trades 24 hours a day, five days a week, offering unparalleled flexibility for traders in any time zone.
What Is Forex Trading?
Forex trading is the act of buying one currency while simultaneously selling another. Currencies always trade in pairs because you need to compare one currency's value against another.
When you buy EUR/USD, you are:
- Buying euros (the base currency)
- Selling US dollars (the quote currency)
If EUR/USD moves from 1.1000 to 1.1050, the euro has strengthened against the dollar, and if you bought, you profit.
Types of Currency Pairs
Major Pairs
The most traded pairs, all involving the US dollar:
| Pair | Name | Typical Spread |
|---|---|---|
| EUR/USD | Euro Dollar | 0.6 - 1.0 pips |
| GBP/USD | Cable | 0.8 - 1.5 pips |
| USD/JPY | Dollar Yen | 0.7 - 1.2 pips |
| USD/CHF | Dollar Swissy | 1.0 - 1.8 pips |
| AUD/USD | Aussie Dollar | 0.8 - 1.4 pips |
| USD/CAD | Dollar Loonie | 1.0 - 1.8 pips |
| NZD/USD | Kiwi Dollar | 1.2 - 2.0 pips |
Minor Pairs (Crosses)
Pairs that do not include USD:
- EUR/GBP, EUR/JPY, GBP/JPY, AUD/NZD
Exotic Pairs
A major currency paired with an emerging market currency:
- USD/TRY (Turkish Lira), USD/ZAR (South African Rand), EUR/PLN (Polish Zloty)
Stick to major pairs when starting out. They have the tightest spreads, most liquidity, and most predictable behavior. On RoboForex MT4, you will find all major, minor, and exotic pairs available for trading.
Understanding Pips
A pip (Percentage in Point) is the smallest standard price movement in a currency pair. For most pairs, a pip is the fourth decimal place (0.0001).
Pip Calculation Examples
| Pair | Price Move | Pips |
|---|---|---|
| EUR/USD | 1.1000 to 1.1050 | 50 pips |
| GBP/USD | 1.2500 to 1.2485 | -15 pips |
| USD/JPY | 150.00 to 150.50 | 50 pips* |
*Note: JPY pairs use the second decimal place as a pip (0.01) because the yen is valued differently.
Pip Value
The monetary value of each pip depends on:
- The currency pair
- Your position size (lot size)
- Your account currency
For a standard lot (100,000 units) of EUR/USD:
- 1 pip = $10
- 50 pips = $500 profit or loss
For a mini lot (10,000 units):
- 1 pip = $1
For a micro lot (1,000 units):
- 1 pip = $0.10
RoboForex ProCent accounts let you trade with cent lots, making 1 pip worth just $0.01. This is perfect for learning forex without risking significant capital.
The 24-Hour Forex Market
Forex operates across four major sessions:
| Session | Hours (UTC) | Key Currencies | Character |
|---|---|---|---|
| Sydney | 22:00 - 07:00 | AUD, NZD | Low volatility, quiet |
| Tokyo | 00:00 - 09:00 | JPY, AUD | Moderate, yen-focused |
| London | 08:00 - 17:00 | EUR, GBP, CHF | Highest volume, trends |
| New York | 13:00 - 22:00 | USD, CAD | High volatility, news-driven |
Session Overlaps
The best trading opportunities occur during session overlaps:
- London + New York (13:00 - 17:00 UTC): The most volatile and liquid period. About 70% of all forex transactions occur here.
- Tokyo + London (08:00 - 09:00 UTC): Brief but can produce sharp moves, especially in EUR/JPY and GBP/JPY.
How Forex Trading Works in Practice
Step-by-Step Trade Example
- Analysis: You study EUR/USD and see a bullish setup on the 4H chart
- Entry: You buy 0.1 lots (mini lot) of EUR/USD at 1.1000
- Stop Loss: You set a stop loss at 1.0970 (30 pips risk = $30)
- Take Profit: You set take profit at 1.1060 (60 pips reward = $60)
- Risk:Reward: Your risk:reward ratio is 1:2
- Outcome: Price reaches 1.1060, your trade closes in profit at $60
Leverage in Forex
Forex brokers offer leverage, allowing you to control larger positions with less capital. RoboForex offers up to 1:2000 leverage on certain account types.
| Leverage | Capital Required for 1 Standard Lot |
|---|---|
| 1:100 | $1,000 |
| 1:500 | $200 |
| 1:1000 | $100 |
Leverage amplifies both profits AND losses. A 50-pip move against you on a standard lot is a $500 loss regardless of leverage. Always use proper position sizing and stop losses.
Getting Started with Forex on RoboForex MT4
- Open a ProCent account to start with minimal risk
- Download MT4 and log in with your credentials
- Add forex pairs to your Market Watch (right-click > Symbols)
- Practice on demo until you are consistently profitable
- Start live trading with small cent lots and strict risk management
Knowledge Check
Summary
Forex is the world's largest market, offering 24-hour access, deep liquidity, and opportunities across dozens of currency pairs. Understanding how pairs work, how to calculate pips, and when the market is most active gives you the foundation to start trading forex. Begin with a RoboForex ProCent account on MT4, master the major pairs, and always respect leverage by using proper risk management.