As the momentum of business activity fluctuates, the business cycle in the world economy also changes. As a Forex trader, your job is to understand the Basic Concept of Economic Expansion and recession and recognize each economy worldwide, and where their cycle is going.

An economic cycle is divided into two cycles. These cycles create a “risk-on” and “risk-off” market environment based on which investors allocate their money.

• Economic expansion cycle
• Economic recession cycle

Economic expansion cycle:–

Expansions refer to a strong and growing economy. It is a phase of the business cycle characterized by increasing economic activity and growth in a country’s overall output of goods and services. It is often associated with positive trends in indicators such as gross domestic product (GDP), employment rates, consumer spending, business investment, and rising stock markets. When a country’s gross domestic product goes up over a specific period of time, it is viewed as, having an economic expansion. Economic growth takes place either as a natural process or through Govt. interference.

To create demand or to add money to a financial system, the central bank of the country purchases Bonds in the open market. By that, it swaps bonds for cash that investors put into commercial banks. For that, commercial banks are more able to lend out this excess of money at low-interest rates.  Due to the low-interest rates of loans, it is more affordable for small companies and big corporations, an opportunity to increase their business activities. For example, purchase manufacturing plants and high-tech equipment, and hire more manpower, so they can produce more goods and services.

To create supply, the central bank of countries can change its Reserve requirements or lower interest rates, by which taking money out of the financial system. Interest rate manipulation is a key tool central banks use for managing the economic cycle.

Key Features of an Expansion Cycle:-

The below features of an expansion cycle you must remember.

• Rising employment
• Higher disposal income
• The demand for Household goods rises
• Consumer spending increases
• Rising sales
• Production increases
• Healthy wages

Economic recession cycle:–

An economic recession is a period of significant economic decline, typically characterized by a contraction in GDP for a couple of quarters, widespread job losses, reduced consumer spending, and declining business activity. The recession affects the following areas of the economy:

The stock market, the Labor market, the housing market, and many more.

In this type of environment, cash supply starts to diminish as consumers limit their spending and businesses restrict their funding. It is natural that lower funding by businesses results in higher unemployment.

Generally, the recession is not good; however, it is not as extreme as the depression. Depression is considered if a recession lasts for a long time.

Features of the Recession Cycle:-

The below features of a recession cycle you must remember.

• Companies eventually fire
• Lower disposal income
• Demand for goods is decreasing
• Business cut their production
• Higher unemployment rates
• Very less wages.

To address a recession, governments and central banks often employ expansionary fiscal and monetary policies. These measures can include reducing interest rates, implementing stimulus packages, increasing government spending, and providing support to affected industries. The aim is to boost economic activity, restore confidence, and stimulate spending to bring the economy out of the recessionary phase.

I hope this article is helpful for you to understand the Basic Concept of Economic Expansion and Recession.

Stay tuned to our website for more tutorials about Forex Market. If you have any suggestions or queries, feel free to Contact us or drop your message in the comment section below.

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Technical analysis is a methodology used by traders and investors to analyze and predict the price movements in Forex markets. It involves the study of historical price data, volume, Candlestick patterns, price action, market trends, and other technical indicators to provide insights into future price movements. But do not think that technical analysis is everything for trading in the Forex market. Yet if you think so, you will understand that one day after blowing your account.

Another truth of this market is any good strategy will not work for all traders. So make your strategy by yourself. Let me give you a real-life example, I am a good cook. So my neighbors and friends are always requesting me to give my secret recipes. And I always gave them my recipes and they try to cook dishes like me. You know what, none of those people who took my recipe could prepare dishes as identical as I do.

They all use the same ingredients and even the same brand! Yet all of them produce different results. The fact is “It is not what ingredients I use that matter. It is how they use it that matter. This applies to trading too. You and I can use the same technical indicators but yet produce different results.

Various types of Tools and Indicators for Forex technical analysis

By analyzing charts and using various tools and indicators, technical analysts attempt to identify potential entry and exit points for trades and make predictions about future price direction. Here are some key concepts and tools commonly used in Forex technical analysis, which will be discussed deeply in future articles.

I hope this article is helpful for you to understand the Introduction To Technical Analysis.

Stay tuned to our website for more tutorials about Forex Market. If you have any suggestions or queries, feel free to Contact us or drop your message in the comment section below.

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What is fundamental analysis?

Fundamental analysis is a method used to evaluate and analyze the intrinsic value of a financial instrument, such as a currency pair in the Forex market. It involves examining various economic, financial, and geopolitical factors that can influence the value of a currency. By understanding these factors, traders and investors can make decisions about buying or selling currencies based on their analysis of the fundamental data.

Before going into a deep study, I have a question for you all, why should you need fundamental analysis? I hope there are several answers you have. Let’s look at why we care about fundamentals for Forex trading:

If you are purely dependent on only technical analysis and you have an open position now and then assume that the Fed decides to cut the rate or hike the rate all of a sudden. What will happen? Immediately the price can move 100-200 pips against you within a few minutes and you will stop out. Especially in today’s market environment, you will find that you will get stopped out very frequently even if you have a great technical strategy.

Various economic fundamentals drive the Forex markets in the long term and determine the overall direction of the trend. This is what hedge fund traders and smart money traders focus more on. The most professional successful traders involve fundamental analysis 70%  and 30% technical analysis for trade execution. Yet, a lot of retail traders only read about technical indicators and watch technical analysis videos. And I think that is the reason most of them lose.

Key Elements of Fundamental Analysis in Forex:-

Here are some key elements of fundamental analysis in Forex that we all discuss in future articles:

• Economic indicators
• Central bank policies
• Geopolitical factors
• Market sentiment
• Intermarket Analysis

If you want to become a successful and consistently profitable trader, the first step you need to take is to master fundamental analysis even if you are an intraday trader. You do believe we are here to make you a successful trader in all aspects. 

I hope this article is helpful for you to understand the Introduction of Fundamental Analysis.

Stay tuned to our website for more tutorials about Forex Market. If you have any suggestions or queries, feel free to Contact us or drop your message in the comment section below.

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The purpose of brokers is to facilitate the trade of the traders. After you open a trading account, the broker gives you the right to execute trade/ transactions, which includes certain rights and privileges, including the right to be a bull or a bear. The terms bulls and bears are nothing but used to describe the sentiment and behavior of market participants. Traders use these terms to identify the direction someone was trading in the market.

The term bull was derived from the way in which bulls attack or charge, moving upward. On the other hand, bears move downward when they attack the charge. Therefore bulls or bullish denotes a buying market, because they believe prices will continue to move upward or rise whereas bears or bearish denotes a selling market because they believe prices are going move downward or fall.

Bullish investors are optimistic and have a positive outlook on the market. They anticipate upward price movements and may open long positions (Buy positions) to profit from potential gains. Bearish investors have a pessimistic view of the market and anticipate downward price movements. They may open short positions (sell positions) or take other actions that can benefit from falling prices.

Now understand why we are telling about bulls and bears because every trader has to make a decision to be either a bull or bear before executing the trade. To make a profit in the market, you must always buy low and sell high. Both bulls and bears are trying to do that.

I hope this article is helpful for you to understand the  Market participants: Bulls and Bears.

Stay tuned to our website for more tutorials about Forex Market. If you have any suggestions or queries, feel free to Contact us or drop your message in the comment section below.

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• Understanding currency pairs
• Bid and Ask price
• Spreads
• Pips and calculation of pips
• Multiple lot sizes and calculation of values against lot size
• Multiple types of orders
• Leverage and margin.
• Different Forex sessions and their impacts.
• Develop a demo environment for Forex trading.

We will cover all the above topics one by one in the next articles.

This is all about How to trade on Forex, stay tuned with us to know more about the Forex Market terms and interfaces used to trade on the Forex.

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Lot Size: A lot refers to the standardized trading size in Forex. Different lot sizes are used to determine the position size and the value of a pip movement. There are three main types of lot sizes:

Standard Lot (1.00):-

A standard lot consists of 100,000 units of the base currency. For example, if you’re trading the EUR/USD pair, a standard lot represents 100,000 euros.  Whenever you execute any order by standard Lot you should put 1.00 on the lot section.

Mini Lot (0.10):-

A mini lot is 1/10th the size of a standard lot, equivalent to 10,000 units of the base currency. Whenever you execute any order by Mini Lot you should put 0.10 on the lot section.

Micro Lot (0.01):-

A micro lot is 1/100th the size of a standard lot, equivalent to 1,000 units of the base currency. It is the smallest lot size in the Forex market, whenever you execute any order by Micro Lot you should put 0.01 on the Lot section

All above are the standardization of Lot size in theory. Nevertheless, select the Lot size as you wish. For instance, Lot size maybe 0.01, 0.02 …. 0.9 or 0.1, 0.2 …..0.9 or 1.0, 2.0 …… 100.00 onwards.  It means it depends on traders, whatever they want to do.

Calculation Examples:

Calculating Pip Value:

To calculate the value of a pip movement, you need to consider the lot size and the currency pair involved. The formula for calculating a pip value is:

Pip Value = (Pip in decimal places / Exchange Rate) * Lot Size. For example, if you’re trading one standard lot of EUR/USD, and the exchange rate is 1.2000, and the pip value is in the fourth decimal place (0.0001), the pip value would be: Pip Value = (0.0001 / 1.2000) * 100,000 = $8.33

Calculating Profit/Loss: To calculate your profit or loss, you need to know the number of pips gained or lost and the lot size. The formula for calculating profit/loss is:

Profit/Loss = (Pips * Pip Value) / Lot Size For example, if you gained 50 pips on a trade with a mini lot (0.1) on EUR/USD, and the pip value is $1, the profit would be:

Profit = (50 * $1) / 10,000 = $5

Let us make it more understandable by below tabulated format:

It is advisable that, after reading this article you have to try once on a demo environment. We will explain later how to create a demo environment to practice everything which you learned from here. These calculations may vary depending on your broker and the currency pair being traded.

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In most currency pairs, a pip is represented by the fourth decimal place, except for the Japanese yen (JPY) pairs, where it is represented by the second decimal place. For instance, if the GBP/USD currency pair moves from 1.2301 to 1.2306, it has moved 5 pips. And in the context of the JPY pair if the USD/JPY moves from 143.70 to 143.75 it has moved 5 pips. The fifth decimal place is known as pipet and it is generally not considered for calculation.

To calculate the monetary value of a pip, you need to consider the lot size of the trade. Lot sizes can vary according to you. You will learn about Lot size right next.

It’s important to note that different Forex brokers may have variations in how they calculate pip values, so it’s always advisable to check with your specific broker or trading platform to ensure accuracy in your calculations.

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Spreads in currency pairs refer to the difference between the bid price and the ask price of a currency pair in the Forex market. The spread is typically quoted in pips (You will learn about pips right next). It is essentially the cost that traders incur when executing a trade. The spread exists because Forex brokers need to make a profit, and it serves as their compensation for facilitating trades.

As your know Currency pairs are quoted in two prices: the bid price and the ask price. The bid price is lower than the ask price, and the difference between them is the spread. For instance, if the bid price for the GBP/USD currency pair is 1.3089 and the asking price is 1.3091, the spread would be 2 pips.

Spreads can be categorized into two types: fixed spreads and variable spreads. Fixed spreads remain constant regardless of market conditions. On the other hand, variable spreads fluctuate depending on market volatility and liquidity. Variable spreads tend to widen during periods of high market volatility or low liquidity.

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The bid price in a currency pair represents the highest price that a buyer is willing to pay for the base currency It is the price at which market participants are eager to buy the base currency. Traders who want to sell the base currency will receive the bid price if their sell order is executed.

The asking price, also known as the offer price, is the lowest price at which a seller is willing to sell the base currency in exchange for the quoted currency. It is the price at which market participants are eager to sell the base currency. Traders who want to buy the base currency will need to pay the asking price if their buy order is executed.

For example, let’s consider the currency pair GBP/USD. If the current quote for GBP/USD is 1.2041/1.2042, it means that the bid price is 1.2041, and the ask price is 1.2042. If you want to buy GBP (base currency) and sell USD (quote currency), you will need to pay the asking price of 1.2042. On the other hand, if you want to sell euros and buy US dollars, you will receive a bid price of 1.2041.

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For Example: In the GBP/USD currency pair the GBP (Great Britain Pound) is the base currency and USD(US Dollar) is the Quote Currency

The exchange rate indicates how much of the quoted currency is required to buy one unit of the base currency.  They provide opportunities for buying or selling one currency in exchange for another with the expectation of profiting from changes in their relative values.

For Example, If the exchange rate of GBP/USD is 1.2736, it means that 1 pound (GBP) can be exchanged for 1.2736 US dollars (USD).

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