What is forex trading? – The main features of forex trading
Forex trading is trading in various foreign currencies. In the recent past, this type of trading was available exclusively to institutional traders and large banks. But now ordinary people can enjoy all the advantages of the foreign exchange market. This is possible thanks to the development of high-speed Internet and the emergence of brokerage firms.
Currencies of various countries are valued on floating quotes and exchange pairs. There are many currencies involved in the market, but the United States dollar, European currency, Japanese yen, British pound and franc are considered key.
How to work Forex
If you correctly predict the price behavior of currencies, you can make a deal and get a decent profit. If everything happens as you expected, and the price moves in the direction you predicted, you will earn some money. It all depends on the size of the traded lot. If your forecast is wrong, be prepared for the loss of a certain part of the deposit. Here is such a simple principle of operation on this currency exchange.
Trading operations are performed by brokerage companies or dealers of large banks. Forex is an integral part of the global market. When Europeans sleep sweetly, Americans are actively trading. But the residents of New Zealand, Australia and Japan are the first to start trading. As you can see, the exchange operates around the clock, so you can earn constantly. On the weekend, however, activity is greatly reduced, but even these days some speculators manage to earn.
Prices change always. True, unlike stocks, the movement of the value of currencies occurs smoothly. Sometimes an exception occurs if, for example, in some country there was a sudden change of government or hostilities began. Then the national currency of this state may sharply decline. But this happens very rarely. The daily turnover of the exchange market is more than five trillion. dollars, which provides tremendous liquidity.
Forex does not have a clear address and a centralized exchange. He’s around. Where exchange currencies, there forex. It never stops and is constantly functioning.
A simple trader has the opportunity to trade through a brokerage firm, which will provide him with a leverage (loan). It will increase the total amount of player funds. And the usual speculator will trade at the same price fluctuations and rates as large companies.
The main features of forex trading
The currency exchange market does not have a specific location and a centralized exchange, but this does not prevent it from being the largest global financial market. It significantly exceeds the size of futures and stock markets, and operates with the help of an electronic network of banks, various kinds of companies and private investors.
At this exchange one foreign currency is bought at the same time and another is sold. All currencies are traded exclusively in pairs. Simply put, one currency is bought for another. The main currencies are: the United States dollar, Euro, Yen of Japan, pound sterling, franc, dollars of Australia and Canada.
There are two types of players acting on Forex. The first type is hedger. He participates in international operations, using Forex as protection against adverse fluctuations in the exchange rate. The second type is a speculator who trades currency solely for the purpose of making money (making a profit).
Exchange rates never stand still, but they change all the time. Fluctuations in currency prices depend on a number of political and economic factors: international trade, interest rates, inflation rates, political stability in a particular region, and the like.
There are many reasons for such great investor interest in Forex trading. Here are the main ones:
Lack of intermediaries;
No commission (broker spread only);
The absence of fixed values of operations;
Low trade costs;
Availability of leverage;
Online access through trading terminals;
The ability to profitably trade in different trends (bull and bear);
Lack of a single entity controlling the market;
Lack of insider trading.
To begin real trading on Forex, an investor needs a personal computer (or phone) and a good Internet connection. An account can be opened even with 10 dollars. But it is better to still have $ 200-500. So you can earn more.