What is Forex and how to make money on it
Explain in a nutshell what Forex is?
It is practically impossible, since it is a rather complex currency trading system, which includes a lot of concepts and definitions. But in this article I will still try to reveal the basic principles of working on Forex in a language that is easy to understand.
What is Forex - a currency exchange (market) where currency is bought and sold at the market rate, the rate is set as a result of supply and demand, under the influence of external and internal factors.
The volume of trading operations is practically unlimited; the total daily market turnover is more than 4 trillion US dollars.
We can say that this is a completely virtual market, since all transactions on it are carried out online.
Anyone can trade currency, but not directly, but through specially organized firms - Dealing Centers, which transmit orders to buy or sell currency to their representatives on the exchange.
What is a Forex exchange and who can trade on it?
1. Market participants - counterparties between whom transactions occur, are divided into three groups:
• Market makers are large financial institutions that directly trade on the market, these are national and commercial banks, financial companies and corporations.
• Currency dealing centers are companies engaged exclusively in speculative trading, which do not enter the market on their own, but work through market makers and make a profit from the difference between the purchase and sale of currency.
• Traders are the smallest players; they enter into their transactions through dealing centers and profit from changes in exchange rates.
2. The trading instrument is currency, or, to be more precise, currency pairs. The market takes into account not the exchange rate of a particular currency, but its price in relation to another, and a similar ratio is recorded in the form of a quote.
For example, EUR/CAD shows how much 1 euro is worth in Canadian dollars.
Lately, speaking about what can be traded on Forex, almost all assets within the framework of CFD contracts are included - metals, energies, securities, etc. But in reality, this market only trades currencies and cryptocurrencies.
3. Working hours – around the clock, 5 days a week, excluding holidays and weekends. Trading begins on Monday night and ends late Friday evening.
If you are interested in the schedule of trading sessions, you can find it here - http://time-forex.com/torgovye-sessii-forex
It should be noted that trading in cryptocurrencies is carried out seven days a week without breaks, which significantly expands the opportunities for earning money.
4. Trading place – the Forex market does not have a specific trading place; all operations are carried out interactively or online, using electronic trading systems.
Simply put, a computer and special programs, trading platforms, and recently it has become possible to engage in trading on smartphones.
The concept of trading sessions is conventionally used, that is, at a certain time, trading is carried out in a virtual trading session, depending on the time zone. For example – European session, American session.
How to start making money on Forex
It may be easier to understand what the Forex exchange is if you consider how they make money on it. The essence of making money is to make a profit by changing the exchange rate, that is, you buy one currency for another and make a profit due to the rise in price of the purchased currency.
The main thing is to correctly determine in which direction the exchange rate will move and open a deal in time, but for this there are a lot of different trading strategies.
Thanks to the development of the Internet, in order to start making money on Forex on your own, you just need to carry out a few simple steps:
2. Download and install the trader’s trading terminal.
3. Select a trading instrument - it will be determined which currency pair you will trade.
4. You can learn how to make deals by reading the instructions for the trader’s terminal.
But these, unfortunately, are only technical aspects of trading; in order to make money, you will need to learn how to predict the movement of exchange rates, only in this case you will be able to make a profit.
In conclusion, we can draw the following conclusion.
Answering the question of what Forex is, we can say that it is a system that connects all participants in the foreign exchange market, regardless of their location, which serves for the instant exchange of one currency for another.
In addition, recently the financial market has turned into a place for speculation, and there has always been speculation on the stock exchange, but at the moment the volume of speculative transactions is already beginning to exceed the volume of transactions concluded to meet the real needs of market participants.
Before starting work, it is very important to understand that stock trading is not a game, but painstaking work that requires a lot of knowledge and experience.