Build the vocabulary and mental model you need before placing a trade.
Beginner10–12 min readText lesson + quiz
By the end, you can:
Read a basic bid/ask quote
Explain a currency pair and pip
Describe risk before sizing a position
1 Foundations2 TradingView3 MetaTrader 5
01 · The playing field
Market basics
Every market is an ongoing auction. Buyers place orders because they believe an asset may be worth more later; sellers offer it because they are willing to exchange it at a price now. When those views meet, a transaction prints and the market price changes.
BidThe highest price a buyer is currently offering.
AskThe lowest price a seller is currently willing to accept.
SpreadThe gap between the bid and ask. It is a trading cost you start by crossing.
LiquidityHow easily you can buy or sell without moving the price much.
Prices move when the balance of aggressive buying and selling changes. News, economic data, interest-rate expectations, and simple order-flow imbalances can all shift that balance. A liquid major pair may have a tight spread, while a less-traded instrument can have a wider spread and more slippage.
Beginner lens: A green candle does not mean “buy.” It only shows that, during that candle’s time window, buyers pushed the last traded price higher than where it opened.
Platform screenshot placeholderReplace with course asset
EUR / USDForex quote
EUR base currency/USD quote currency
BID1.08420
ASK1.08435
SPREAD1.5 pips
1 Base: EUR2 Quote: USD3 Bid / ask4 Spread
Screenshot placeholder 01: Annotated currency-pair quote. The numbered callouts identify the base currency, quote currency, bid/ask, and spread.
02 · Reading the quote
Currency pairs
Forex is quoted in pairs because one currency is exchanged for another. In EUR/USD, EUR is the base currency and USD is the quote currency. A quote of 1.08435 means one euro is priced at 1.08435 US dollars. If EUR/USD rises, the euro is strengthening relative to the dollar, or the dollar is weakening relative to the euro.
Example
If you buy EUR/USD at 1.08435, you are buying euros and selling dollars. A move to 1.08635 is a 20-pip move in your direction because the fourth decimal place moved by 20.
Majors pair a major currency with the US dollar, such as EUR/USD, GBP/USD, or USD/JPY. They usually have deep liquidity.
Minors combine major currencies without USD, such as EUR/GBP or AUD/JPY.
Exotics combine a major currency with an emerging-market currency. They can carry wider spreads and different liquidity conditions.
Pip is a common unit for describing a small currency-price change. For most pairs it is the fourth decimal place; for many yen pairs it is the second.
Quotes can feel backwards at first. Slow down and ask: “What is the base currency doing against the quote currency?” That single question prevents many early mistakes.
03 · Protecting your account
Risk terminology
Risk management is not a promise that a trade will win. It is the set of decisions that limits how much one idea, one bad entry, or one losing streak can cost. Learn these terms before learning entries.
Lot sizeThe amount of currency or contracts in a position. Larger size makes each price move matter more.
LeverageBroker-provided buying power that lets a smaller deposit control a larger position. It magnifies losses as well as gains.
MarginFunds set aside to open and maintain a leveraged position. It is not the same thing as your maximum safe loss.
Stop-lossA preplanned exit level intended to cap a trade’s loss if the idea is invalidated.
Take-profitA preplanned exit level for closing a trade at a target. It is not guaranteed to fill exactly.
DrawdownThe decline from an account or strategy peak to a later low. It describes pain and recovery required.
Risk-to-rewardA comparison of planned loss to planned profit. A 1:2 setup risks one unit to seek two.
Position sizingChoosing lot size from your stop distance and maximum planned loss, rather than choosing size first.
Plain-language example: If a $10,000 demo account has a 1% maximum risk rule, the planned loss is $100 before fees or slippage. The stop distance and instrument value then determine the position size. The percentage is a guardrail, not a guarantee.
Platform screenshot placeholderReplace with course asset
EntryStop-lossTake-profit
TRADE PLANRisk / reward1 : 2Risk 1R · Target 2R
1 Entry2 Stop-loss3 Take-profit4 Risk / reward
Screenshot placeholder 02: Annotated chart and risk panel. Treat the levels as a plan to define risk, not a prediction of what price must do.
Knowledge check
Test your foundations
Answer every question, then review the explanation for each choice. You can retry as many times as you like.