The Forex market, also known as Forex. FX or Currency Market is a decentralized and global market in which currencies are traded. This market was born with the aim of facilitating the monetary flow that is derived from international trade. It is by far the largest financial market in the world, moving a daily volume of transactions of about five trillion US dollars, more than all other stock markets on the planet combined.
- It has grown so much that, at present, the total foreign exchange operations that are due to international operations of goods and services represent an almost residual percentage, most of them being the purchase and sale of financial assets.
- Consequently, this market is quite independent of actual commercial operations and variations between the price of two currencies can not be explained exclusively by changes in trade flows.
Forex is an acronym for Foreign Exchange market. It is the largest financial market in the world, with a turnover of more than 4 trillion dollars daily. To understand what this volume means, it is what the New York Stock Exchange (the largest in the world) can move in a whole month.
What is Forex Trading?
With money. How? Yes, Forex trading consists of buying and selling currencies, currencies, that is, money. Currencies are traded through a broker or dealer and are traded in pairs, for example, euro and US dollar.
You really do not buy or sell anything physically so you may confuse it a bit. Think of the purchase of foreign currency as the purchase of a share in the economy of a country, since the price of its currency is a direct reflection of what the market thinks about the present and future state of the country’s economy. In Forex, as mentioned, it is traded in currency pairs, as stated in this paragraph the price of trading a particular currency pair reflects the economic conditions of a particular country versus the country of the other currency that makes up the pair.
Unlike other financial markets, the Forex market is decentralized and has no physical location. The Forex market is considered an over-the-counter or over-the-counter market, due to the fact that this market operates electronically, in a network among banks 24 hours a day.
In the late 1990s, only investors with a high financial power could access Forex trading, with initial capital above $ 10 million. Forex was originally designed to be used by banks and large institutions. However, due to the expansion of the internet, there are now online Forex companies that offer “retail” Forex trading for retail investors.
When do you trade in Forex?
The Forex market is unique, it is open 24 hours a day. From Tokyo to New York, passing through London, the market moves and can operate at any time, day and night.
Opening and closing of the three most important centers (time expressed in GMT):
- Tokyo: It opens at 0 o’clock and closes 9 o’clock.
- London: Open at 8 and close at 17.
- New York: It opens at 13 and closes at 22.
Main attractions of Forex trading
Usually, the trader is not charged with commissions of almost any kind. The brokers through which it operates to charge the spread, typically representing less than 0.1 percent cost per transaction, in larger brokers, it may even be less than 0.07 percent, of course, it depends on leverage, we will see this in more detail later
Without intermediaries. The Forex market as we refer to in eFXto is the Forex spot market, which means trading directly with the market.
Flexible lots. The minimum contract per transaction is very flexible in Forex against other markets. And you also choose the size of your operation. This allows you to participate with accounts as small as $ 50, you can even trade with cents !! (Although it is not good to operate with such small accounts, you will discover it throughout the course).
From Sunday evening to Friday afternoon you can operate at any time of day, even in principle, there is no deadline for closing your operation.
A small sum of capital can control a much larger volume of Forex trading, this is due to the high leverage available in this market. For example with a 100: 1 leverage, you can make an operation of 100 thousand coins with a deposit of only one thousand. But this is a double-edged sword, using high leverage can lead to big gains or high losses.
Being such a huge market, the liquidity it offers is equally enormous. This means that under normal market conditions, you can buy or sell instantly.
Mini and micro trading.
You can start trading Forex with mini or micro accounts that require small minimum deposits, $ 500 or less. This makes it accessible to virtually everyone, however, to be able to operate with an appropriate risk control can be recommended a higher initial deposit, you will understand.
How to Trade in Forex
Forex Opportunities: What is your opinion?
As with stocks, you can trade currencies based on your opinions on the values of the currencies (or the prices that you think currencies will have in the future). However, what distinguishes Forex is that you can trade in both bullish and bearish trends. If you think a currency will go up in price, you can buy it. If you think its price will fall, you can sell it. Also, since Forex is so great, finding buyers and sellers is much easier than in other markets subject to liquidity.
To see an example, you may have heard in the news that China is devaluing its currency to attract foreign investment. If you think that trend will continue, you can do a Forex trading: sell Chinese Yuan in exchange for another currency, say, the US dollar. The more the yuan depreciates compared to the dollar, the higher your earnings. On the other hand, if the yuan appreciates after having sold it in exchange for dollars, you will suffer losses and want to exit the market.
How Does Currency Trading Work?
In the past, currency trading was an activity done by international tourists. When a person traveled to another country, he had to change his currency by the local currency at the current exchange rate of the moment.
However, currently trading currency is a type of investment that has gained great popularity. Now traders can speculate on the exchange rate variations of two different currencies.Trading is both a lucrative and leisure activity.