What are the markets?
A market is just a place where people agree a price. The
financial markets are the same thing at enormous scale.
Banks, funds, governments and companies are all buying
and selling currencies, metals and shares, every second
of every weekday.
Prices move because more people want to buy than sell, or
the other way round. That's it. Everything else is an
attempt to work out when that is about to happen.
Nobody is in charge. The market isn't a person and it has
no opinion about you.
What is a currency pair?
Currencies are always priced against each other, because
a pound is only worth something compared to something
else. That's why you see them in pairs like GBPUSD,
pounds against dollars.
The first currency is what you're buying or selling. The
second is what you're measuring it in. If GBPUSD rises,
the pound has strengthened against the dollar.
XAUUSD is gold priced in dollars, XAU being the code for
gold. US30 tracks the Dow Jones, thirty large American
companies in one number. Those two are what we focus on,
because they move enough to be worth trading and behave
in ways you can learn.
What is a pip?
A pip is the smallest standard unit a price moves in. On
most currency pairs it's the fourth decimal place, so
GBPUSD going from 1.2650 to 1.2651 is one pip.
It exists so traders can talk about movement without
money getting in the way. "That's forty pips" means the
same thing whether you're trading £10 or ten
thousand.
What a pip is worth to you depends entirely on your
position size, which is where risk comes in.
What is a lot?
A lot is how much you're trading. A standard lot is
100,000 units of the base currency, a mini lot is 10,000
and a micro lot is 1,000.
The number matters because it decides what each pip costs
you. The same twenty pip move might be £2 or £200
depending on your size. Same market, same move, very
different consequences.
Beginners almost always trade too big. It's the quickest
way to lose an account.
How do you read a candlestick?
A candlestick shows you four things about one period of
time: where price opened, where it closed, and the
highest and lowest it reached in between.
The thick part is the body, running between the open and
the close. The thin lines above and below are the wicks,
showing how far price got before coming back.
A one hour candle covers an hour. A daily candle covers a
day. Same information, different span.
The wicks are the interesting part. A long wick means
price went somewhere and was rejected, which tells you
more than the close on its own ever will.
What is the spread?
There are always two prices: what you can buy at and what
you can sell at. The gap between them is the spread, and
it's how your broker gets paid.
It means every trade starts slightly behind. Price has to
move in your favour before you're level, let alone in
profit.
Spreads widen around major news and at quiet times of
day, which is one reason when you trade matters as much
as what you trade.
What is leverage?
Leverage lets you control a position larger than the
money in your account. At 1:100, £1,000 controls
£100,000 worth.
It gets sold as opportunity. It's better understood as
amplification. It multiplies your gains and your losses
identically, and it has no opinion about which.
Used carefully it's a tool. Used carelessly it's the
reason a beginner can lose an account in an afternoon.
Most people who blow up weren't wrong about direction.
They were too big to survive being temporarily wrong.
What does a broker do?
A broker gives you access to the market and a platform to
trade on. They make money from spreads and commissions.
Check they're regulated somewhere serious, and understand
what protection that gives you if things go wrong. An
unregulated broker offering huge leverage and a bonus is
a warning, not an offer.
What is risk management?
Deciding what you're prepared to lose before you think
about what you might win.
In practice it's three things. How much of your account
goes on one trade, usually a small percentage. Where you
get out if you're wrong, set before you enter. And how
much you're aiming to make relative to what you're
risking.
It's the least interesting part of trading and the only
part that decides whether you're still here in a year.
You can be right less than half the time and still make
money, if your winners are bigger than your losers.
Why do most beginners lose?
Not because they can't read a chart. The patterns are
learnable and the information is free.
They lose because they trade too big, so one bad run ends
them. They take trades out of boredom rather than
because anything was there. They move stops when price
goes against them, turning a small loss into a large
one. They double up to win it back. And they judge every
trade by whether it made money, rather than whether
taking it was the right decision.
Every one of those is a decision made by a person, not
the market. Which is why the work is mostly on you.
Where to go from here
Open a demo account and look at charts every day for a
month. Not to trade them, just to get used to what
movement looks like. Keep a note of what you see.
Learn when the markets you're watching are actually
active. Watch how price behaves around
high impact news and you'll
quickly understand why timing matters.
Then be patient with yourself. Nobody gets good at this
in a month, and anyone promising otherwise is selling
you something.
