What you're actually trading
Every FX price is a ratio between two currencies. That sounds obvious, and it is the single thing beginners most often fail to hold in their head when a trade goes against them.
When you see GBP/USD at 1.3450, the first currency is the base and the second is the quote. The number is how many units of the quote currency one unit of the base is worth. One pound buys 1.3450 dollars.
So "buying GBP/USD" is not buying an asset that goes up or down on its own. It is a simultaneous bet that the pound strengthens and the dollar weakens, or at least that the pound strengthens more. This matters practically: a GBP/USD trade can lose money on brilliant UK news, if the US news that day was even better.
It also explains something that confuses people constantly — why several of your trades all seem to lose at once. If you are long GBP/USD, long EUR/USD and long AUD/USD, you do not have three trades. You have one trade against the dollar, three times over. One strong US jobs number takes all three down together. We come back to this in Risk & Mindset, because it is one of the fastest ways to lose more than you planned while believing you were diversified.
The seven majors, and their personalities
There are thousands of tradeable pairs. Almost everything you need is in seven of them. They have the tightest spreads, the most liquidity, and the most predictable behaviour — and crucially, they're the ones with enough history to test a strategy against honestly.
| Pair | Nickname | Character |
|---|---|---|
| EUR/USD | Fibre | The most traded pair on earth. Tight spreads, smooth trends, rarely violent. The sensible place to learn. |
| GBP/USD | Cable | Moves further and faster than EUR/USD. Rewarding when you're right, punishing when you're late. |
| USD/JPY | Ninja | Trends beautifully for long stretches, then reverses hard on Bank of Japan news. Quoted to two decimals, not four. |
| AUD/USD | Aussie | Tied to commodity prices and Chinese data. Most active during the Asian session. |
| USD/CAD | Loonie | Strongly influenced by oil. Rises when oil falls, broadly speaking. |
| USD/CHF | Swissy | A safe-haven pair. Often moves as a mirror of EUR/USD. |
| NZD/USD | Kiwi | Similar to the Aussie but thinner. Wider spreads, more prone to whipsaw. |
Notice that six of the seven contain the dollar. That is not a coincidence — it is why US economic releases move almost everything at once, and why "the dollar is strong today" is usually a more useful observation than anything about the other currency.
The exotics trap
Pairs like USD/TRY or USD/ZAR advertise enormous daily ranges, which looks like opportunity. The spread is often ten to thirty times wider than EUR/USD, so you start every trade far further underwater and need a much bigger move simply to break even. The volatility is real; so is the cost of accessing it.
Pips, and what one is actually worth
A pip is the standard unit of price movement. For most pairs it is the fourth decimal place — a move from 1.3450 to 1.3451 is one pip. For yen pairs, which are quoted to two decimals, a pip is the second decimal: 149.81 to 149.82.
Pips are how you measure a move. What matters to your account is what a pip is worth to you, and that depends entirely on your position size. This is the hinge the whole manual turns on, so it is worth being precise now.
Worked example
You are trading GBP/USD at £2 per pip. The price moves 30 pips in your favour: you are up £60. It moves 30 pips against you: you are down £60. The pair does not know or care about your account size — only your stake decides what those 30 pips mean.
Which leads to the question almost every losing trader gets backwards: given where my stop has to go, what stake makes that loss acceptable? Not: given the stake I fancy, where shall I put my stop?
If you take one idea from this chapter, take that one. Chapter 4 turns it into arithmetic.
Sessions: why the clock matters
FX runs 24 hours a day from Sunday evening to Friday evening, but it is emphatically not the same market throughout. Volume and volatility concentrate into recognisable windows, and trading outside them mostly means paying a spread to watch a flat chart.
| Session | UK time | What it's like |
|---|---|---|
| Sydney | 22:00 – 07:00 | Thin. Ranges drift. Usually one to skip. |
| Tokyo | 00:00 – 09:00 | Yen and Aussie pairs come alive; everything else is quiet. |
| London | 08:00 – 17:00 | The big one. Roughly a third of global volume. Trends are born here. |
| New York | 13:00 – 22:00 | Second biggest. US data lands early in this window. |
The overlap is the point
Between 13:00 and 17:00 UK time, London and New York are both open. That four-hour window carries the heaviest volume of the day: the tightest spreads, the cleanest moves, and the most reliable follow-through when a level breaks.
If you have a job and can only trade for a short window, that is the window. A single focused hour in the overlap will teach you more than a distracted day spent watching the Sydney session do nothing.
The Friday afternoon problem
Late Friday is the worst of both worlds: thinning liquidity, position-squaring that has nothing to do with direction, and a weekend gap risk if you hold. Whatever your rules say, they should say something specific about Friday afternoon.
Choosing a timeframe honestly
A timeframe is just how much time each candle represents. A 4-hour chart draws one candle every four hours. The choice is less about which is "best" and more about matching the chart to the life you actually have.
| Style | Charts | Holding | Screen time |
|---|---|---|---|
| Scalping | 1m – 15m | Minutes | Constant, and genuinely stressful |
| Day trading | 15m – 1h | Hours, closed same day | Several hours daily |
| Swing trading | 4h – daily | Days to weeks | Minutes a day |
| Position | Daily – weekly | Weeks to months | Minutes a week |
Most people with a job should be swing trading, and most people with a job try to scalp. The attraction is understandable — more trades feels like more opportunity — but lower timeframes have a worse signal-to-noise ratio, cost you the spread far more often, and demand decisions at exactly the speed at which humans decide badly.
The 4-hour chart is the sweet spot for most people. Six candles a day. Enough movement to be worth trading, slow enough that you can think, and it doesn't require you to abandon your actual job. It's the default this manual assumes and the default DEALFx ships with.
How DEALFx handles this
The app checks all seven majors every hour on your chosen timeframe, so a signal firing at 11am while you're in a meeting isn't a signal you miss. It also tells you how long ago it fired — a four-hour-old setup isn't the same opportunity as a fresh one, and most tools never make that distinction. See how that works →
Reading a candle
Each candle tells you four numbers: where price opened, where it closed, and the highest and lowest it reached in between. The body is open-to-close; the thin wicks are the extremes.
The wicks are the interesting part. A long lower wick means price fell hard and was pushed back up before the candle closed — buyers showed up at that level. A long upper wick is the reverse. Chapter 3 builds several entry signals on exactly this idea.
A note on volume
Your chart will show volume. In FX, treat it with suspicion. There is no central exchange, so your broker can only report what passed through their own book — a rounding error of global turnover. It is a rough proxy for activity, not the real thing. Equity traders arriving in FX are routinely caught out by this.
What to take from this chapter
- Every pair is a ratio — you are always trading two currencies, not one.
- Several dollar pairs in the same direction is one position, repeated.
- A pip is a unit of movement; your stake decides what it's worth.
- The London–New York overlap (13:00–17:00 UK) is the best window of the day.
- Pick the timeframe that fits your life. For most people with a job, that's 4-hour.
- Candle wicks tell you where price was rejected — that's where the signals live.
Next we turn this into a repeatable process: the seven-step checklist to run before every trade.