Learn to trade and Introduction to Forex
The foreign exchange market – known as the Forex – is a global market with room for buying and selling currencies.
Where a large volume of transactions are conducted 24 hours a day, five days a week. Daily trading is estimated at 1.5 trillion USD. In comparison with other financial markets, we will find that the US bond market has a daily turnover of $ 300 billion, while the US stock market is trading $ 100 billion a day.
The foreign exchange market was established in 1971 after the abolishment of the fixed currency exchange system. Since then, currencies began to be valued at ‘floating’ exchange rates, to be determined according to supply and demand factors. The Forex market has grown steadily since 1970, but with technological advances since the 1980s, the volume of market transactions has increased from about 70 billion countries per day to its current levl to 1.5 trillion dollars.
The Forex market consists of about five thousand commercial institutions such as international banks and central banks (such as the US Federal Reserve), trading companies and also brokers for all types of foreign exchange. There is no central place for forex trading – the main trading centers are located in New York, Tokyo, London, Hong Kong, Singapore, Paris and Frankfurt and all exchanges are conducted using the phone or via the Internet. Companies use the market to buy and sell their products in other countries, but the bulk of the Forex market activity is due to currency traders who use it to make profits by taking advantage of the small movements in the market.
Although there are major players in the Forex market, it is still available to young investors thanks to the recent changes in the laws regulating it. In the past, there was a minimum transaction size and investors had always had to meet the strict financial terms for this market. But with the emergence of trading on the Internet, the regulations changed to allow large interbank units to be divided into small contracts. Each contract has a value of approximately $ 100,000 and this level can be accessed by the individual investor using “leverage” – which are loans provided for commercial purposes. Usually, these contracts can be controlled through a leverage of 1: 100, which means that $ 1,000 USD will allow you to control $ 100,000 during currency trading.
There are many advantages to trading on the Forex market.
Liquidity: Because of the large size of the currency exchange market, investments in it are characterized by high liquidity. International banks always make bid and ask offers, and this huge volume of daily transactions always means that a buyer or seller is available for any currency.
Ease of access: The market is open 24 hours a day, five days a week. The market opens its trading on Monday morning, Australian time, while it closes on Friday evening, New York time. The deals can be done online through the home or in the office.
An open market: currency fluctuations are often caused by changes in national economies. The news about these changes can be accessed by any individual at the same time – so there are no “internal transactions” within the Forex market.
No commission: Brokers earn money by placing a spread – the difference between the purchase and sale price of a particular currency.
How does the foreign exchange market work
Currencies are always exchanged in pairs – like the US dollar against the Japanese yen or the British pound against the euro. Every transaction involves selling one currency and buying another, so if the investor believes that the euro will rise against the dollar, he will sell dollars and buy the euro.
The possibility of profit is always available in the Forex market, due to the nature of the continuous movement between currencies until slight changes can be used to achieve great profits due to the large amount of money that exists in each transaction. At the same time, Forex can be considered relatively safe for the individual investor. There are self-guarantees that can be used to protect the interests of both the broker and the investor, as well as software tools that can be used to limit losses.