Forex Trading Basics Explained

Forex (Foreign Exchange) is the global marketplace for buying and selling currencies. It is the largest and most liquid financial market in the world, with over $7.5 trillion traded every single day. When you trade forex, you are simultaneously buying one currency and selling another. For example, if you believe the US Dollar will strengthen against the Philippine Peso, you would buy the USD/PHP currency pair. If it rises from 57.00 to 58.00, you profit from the 100-pip move. The forex market operates 24 hours a day, 5 days a week, from Monday to Friday — spanning the Asian, European, and North American trading sessions. For Filipino traders (PHT, UTC+8), the most active time is the London-New York overlap: approximately 9:00 PM to 12:00 AM PHT.

All forex trades involve a currency pair — two currencies traded against each other. The first currency is the 'base currency' and the second is the 'quote currency.' The exchange rate shows how much of the quote currency you need to buy one unit of the base. MAJOR PAIRS (involve USD, highest liquidity): • EUR/USD — Euro vs US Dollar (most traded pair globally) • GBP/USD — British Pound vs US Dollar • USD/JPY — US Dollar vs Japanese Yen • USD/CHF — US Dollar vs Swiss Franc MINOR PAIRS (no USD): • EUR/GBP, EUR/JPY, GBP/JPY, AUD/JPY EXOTIC PAIRS (emerging market currencies): • USD/PHP — US Dollar vs Philippine Peso • USD/THB, USD/MYR, EUR/SGD For beginners in the Philippines, EUR/USD is the best starting point — it has the lowest spreads and the most educational resources available.

A pip (Percentage in Point) is the smallest standardized price movement in forex. Understanding pips is essential for calculating your profits, losses, and trading costs. For most currency pairs: 1 pip = 0.0001 For JPY pairs: 1 pip = 0.01 EXAMPLE: If EUR/USD moves from 1.1000 to 1.1001, that is a 1-pip move. PIP VALUE depends on your lot size: • 1 Standard lot (100,000 units) = ~$10 per pip • 1 Mini lot (10,000 units) = ~$1 per pip • 1 Micro lot (1,000 units) = ~$0.10 per pip Use our free pip calculator to compute exact pip values for any currency pair and lot size.

Leverage allows you to control a larger position than your account balance alone would allow. It is expressed as a ratio such as 1:100 or 1:500. HOW IT WORKS: With $100 in your account and 1:100 leverage, you can open a position worth $10,000. This means a 1% move in the market results in a 100% gain OR loss on your $100. LEVERAGE IN THE PHILIPPINES: • Exness: up to 1:2000 (very high — not recommended for beginners) • XM: up to 1:1000 • Pepperstone: up to 1:500 • IG: up to 1:200 RECOMMENDATION: Start with 1:10 to 1:50 leverage as a beginner. Higher leverage amplifies losses just as much as gains — this is the primary cause of account blowouts for new traders.

The spread is the difference between the buy price (ask) and the sell price (bid). It is the primary cost of trading forex. EXAMPLE: EUR/USD is quoted as 1.1001 / 1.1002 • The bid (sell) price is 1.1001 • The ask (buy) price is 1.1002 • The spread is 0.0001 = 1 pip On a 1 standard lot trade, a 1-pip spread costs approximately $10. BROKER COMPARISON: • Exness Standard: from 0.3 pips on EUR/USD (no commission) • Pepperstone Razor: from 0.0 pips + $3.50/lot commission • XM Standard: from 0.6 pips (no commission) ECN accounts have tighter spreads but charge a commission per lot. For high-volume traders, ECN accounts are often cheaper overall.