What is Forex
Forex is an international financial market, that was founded in 1976. Forex provides an opportunity to interbank exchange of different currencies at free prices, and quotes are formed without restrictions and fixed values. The participants of Forex are not only private traders. Here central banks of different countries, commercial, financial organizations, as well as various investment and other funds, conclude profitable transactions.
Nowadays, the Forex market is used by traders for making a profit on currency rates difference. Concluding speculative transactions, they can count on a significant enough income. To understand what Forex is and work with this tool can anyone who has an analytical mind, can conduct large-scale monitoring. To be successful, you do not need to have higher education in economics.
Interesting! One of the successful examples of profitable work on Forex is the story of Larry Williams. During a year of trading, he was able to increase his starting capital of 10,000 dollars to 1,100,000 dollars.
In addition to speculative currency transactions, other types of currency trading are conducted in Forex: trading, hedging, regulating. Central banks of different countries conclude the latter.
Despite the possibility of substantial income from individuals, the primary purpose of the project was to ensure average currency turnover between different countries. That's why large financial organizations work at the market as actively as private traders.
How to work at Forex
The principle of operation is simple - trading in Forex is carried out in currency pairs, which the trader chooses himself. The first currency in the pair acts as a commodity, and the second is considered as a payment. The main task of the market participant is to buy cheaper, sell at a higher price. Transactions can be concluded in both directions:
purchase currency at the moment of its price subsidence, and sell it in time after the rate rise;
exchange the currency when its price is at maximum levels, buy it in greater quantity after the price decline, if there are prospects for the repeated rise in price.
It is essential to understand that anyone can trade in Forex. But, before you start work, you need to prepare thoroughly, study a large number of thematic materials. This will help to make correct predictions, increasing the profitability of the deals. If you read a couple of articles and start trading, you risk losing capital.
It is essential to know that transactions in Forex are usually made for vast sums of money, which may not be at the personal disposal of traders. In such situations, resort to the help of an intermediary company - a broker that provides leverage. In this case, before concluding a deal, the trader will need to coordinate it with the broker.
Important! Before starting real trading, it is better to practice on a demo account, which is offered by almost every brokerage company. Here you cannot earn or lose real money, instead of the opportunity to consolidate the previously obtained knowledge, assess your chances of success.
Advantages of Forex market
To assess the validity of the decision to trade at Forex, it is worth considering all the positive aspects of this idea:
24-hour access - due to the time difference between different countries, you can make transactions at any convenient moment, even at night;
a wide range of currency pairs provided the availability of Forex for residents of different countries;
opportunity to train on demo accounts;
a simple principle of operation;
possibility to use leverage to increase transaction amounts;
a large number of support materials.
Remarkable: Brokers usually provide leverage in the ratio of 1:50 to the trader's equity. For example, for every dollar in the account, the brokerage company will be able to provide 50 dollars of credit.
Tools for traders working on Forex
The primary trader's assistant is the economic calendar, which displays all critical events in the world and specific countries that can have a direct impact on the change of the currency. Its extensive functionality characterizes the tool. It can be adjusted by the period of displaying and the degree of importance of events. The economic calendar can be called a "desktop book" of any trader, without which it will be tough to make successful deals.
Charts of price changes in the currency of interest in a certain period will also help you in trading. It can be compared with the events taking place in the world economy, highlighting a specific pattern.
The strategies of experienced traders will also be useful. They should not be taken as a basis in their trading policy but can be relied on as an additional source of knowledge. Ideally, after a certain period of trading at Forex, each trader creates his strategy, which he will use in the future.