What is forex?
Forex, also known as currencies, FX or currency trading, is a decentralized global market of all currencies that are traded worldwide. This market is the largest and most liquid in the world, with a daily volume of operations that exceeds $ 5 trillion. The other stock markets in the world as a whole do not come close to this. But what does this mean for you? Take a closer look at forex trading and you will find interesting trading opportunities that are not available in other investments.
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REGISTER & CONNECT TO LONDON TRADES FOR FREE
REGISTER & CONNECT TO LONDON TRADES FOR FREE
REGISTER & CONNECT TO LONDON TRADES FOR FREE
REGISTER & CONNECT TO LONDON TRADES FOR FREE
REGISTER & CONNECT TO LONDON TRADES FOR FREE
75% of retail investor accounts lose money when trading CFDs with this provider. You should considerwhether you can afford to take the high risk of losing your money.
FOREX TRANSACTION: EVERYTHING IS IN THE EXCHANGE RATE
If you have ever traveled abroad, you have made a transaction in forex. Travel to France and convert your pounds into euros. When you do this, the exchange rate between the two currencies – based on supply and demand – determines how many euros you will get for your pounds. And the exchange rate fluctuates continuously.
On Monday one pound could give you 1.19 Euros. On Tuesday 1,20 Euros. This small change may not seem like a big deal. But think about it on a larger scale. A large international company may have to pay foreign employees. Imagine what you could do to the bottom line if, as in the previous example, changing one currency for another costs more depending on when it does it? These few cents add up quickly. In both cases, you as a traveler or business owner may want to keep your money until the exchange rate is more favorable.
OPPORTUNITIES IN FOREX: WHAT IS YOUR OPINION?
As in the stock market, you can change the currency based on what you think is worth. (or where he’s headed). The big difference with the Forex is that you can trade up or down with the same ease. If you think that a coin will increase the value, you can buy it. If you think that the value will decrease, you can sell it. With such a large market, finding a buyer when you are selling and a seller when you are buying, is much easier than in other markets. Maybe you hear on the news that China is devaluing its currency to attract more foreign businesses to its country.
If you think the trend will continue, you could do a forex trade, selling the Chinese currency against another currency, for example, the US dollar. The more the Chinese currency was devalued against the dollar, the greater will be its benefits. If the Chinese currency increases in value while it has its open sale position, then its losses will increase and it will want to exit the operation.
All Forex trading involves two currencies because you are betting on the value of one currency against another. Think of the EUR / USD, the most operated currency pair in the world. The EUR, the first currency in the pair, is the base, and the USD is the counterpart. When you see a price quoted on your platform, it’s what a euro costs in dollars. You will always see two prices, one is the purchase price and the other is the sale price. The difference between the two is the spread. When you click buy or sell you are buying or selling the first currency of the pair.
FRACTIONS OF A CENT: OPERATE WITH MARGIN
If prices are quoted in hundredths of cents, how can you see a significant return on your investment when you are trading Forex? The answer is leverage.
When you operate forex, you are effectively lending the first currency in the pair to buy or sell the second currency. With a market of US $ 5 billion a day, the liquidity is so deep that the liquidity providers, the big banks, basically allow it to operate with leverage. To operate with leverage, simply set aside the margin required for your operation. If you are trading with 200: 1 leverage, for example, you can trade $ 2,000 in the market with only $ 10 in the margin of your trading account. For a leverage of 50: 1, the same size of operation would only require about $ 40 of margin. This gives you much more exposure, while keeping your capital investment low.
FRACTIONS OF A CENT: OPERATE WITH MARGIN
If prices are quoted in hundredths of cents, how can you see a significant return on your investment when you are trading Forex? The answer is leverage.
When you operate forex, you are effectively lending the first currency in the pair to buy or sell the second currency. With a market of US $ 5 billion a day, the liquidity is so deep that the liquidity providers, the big banks, basically allow it to operate with leverage. To operate with leverage, simply set aside the margin required for your operation. If you are trading with 200: 1 leverage, for example, you can trade $ 2,000 in the market with only $ 10 in the margin of your trading account. For a leverage of 50: 1, the same size of operation would only require about $ 40 of margin. This gives you much more exposure, while keeping your capital investment low.
But leverage not only increases your profit potential. You can also increase your losses, which may exceed the funds deposited. When you are new to the forex market, you should always start trading with small leverage ratios, until you feel comfortable in the market.