What is Forex and how to make money on it?
Explaining forex in a few words is practically impossible, as it's a rather complex currency trading system that encompasses a multitude of concepts and definitions.
However, in this article, I'll try to explain the basic principles of forex trading in easy-to-understand language.
What is Forex? A currency exchange (market) where currencies are bought and sold at market rates. The rate is determined by supply and demand, under the influence of external and internal factors.
The volume of trading operations is practically unlimited, with the total daily market turnover exceeding 4 trillion US dollars.
It can be said that this is a completely virtual market, since all transactions on it are carried out online.
Anyone can trade currencies, but not directly, but through specially organized firms—dealing centers—that transmit orders to buy or sell currencies to their representatives on the exchange.
What is the Forex exchange and who can trade on it?
1. Market participants – counterparties between whom transactions take place – are divided into three groups:
• Market makers are large financial structures that directly trade on the market; these are national and commercial banks, financial companies and corporations.
• Currency dealing centers are companies that are engaged exclusively in speculative trading, do not enter the market themselves, 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 make their transactions through dealing centers and make a profit from changes in exchange rates.
2. The trading instrument is currency, or more precisely, currency pairs. The market takes into account not the exchange rate of a single currency, but its price in relation to another; this ratio is recorded as a quotation.
For example, EUR/CAD shows how much 1 euro is worth in Canadian dollars.
Lately, when discussing what can be traded on Forex, almost all assets are included in CFD contracts—metals, energy, securities, etc. But in reality, only currencies and cryptocurrencies are traded on this market.
3. Opening hours : 24 hours a day, 5 days a week, excluding holidays and weekends. Trading begins Monday night and ends late Friday evening.
If you are interested in the trading session schedule, you can find it here - http://time-forex.com/torgovye-sessii-forex
It's worth noting that cryptocurrency trading is available seven days a week without interruption, significantly expanding earning potential.
4. Trading venue – the forex market does not have a specific trading venue; all transactions are conducted interactively or online, using electronic trading systems.
Simply put, computers and special programs, trading platforms, and recently, the ability to trade on smartphones has become available.
The concept of trading sessions is used loosely, meaning that at certain times, trading takes place in a virtual trading session depending on the time zone. For example, the European session and the American session.
How to start making money on Forex
Perhaps it's easier to understand the Forex market if you consider how people make money on it. The essence of making money is to generate profits from changes in the exchange rate. In other words, you buy one currency with another and make a profit from the appreciation of the purchased currency.
The main thing is to correctly determine which direction the exchange rate will move and open a deal at the right time, but there are many different trading strategies for this.
Thanks to the development of the Internet, to start making money on Forex on your own, you only need to follow a few simple steps:
2. Download and install the trader's trading terminal.
3. Choose a trading instrument – decide which currency pair you will trade.
4. Learn how to make trades by reading the instructions for the trader's terminal.
But, unfortunately, these are only the technical aspects of trading. To make money, you will need to learn to predict exchange rate movements; only then will you be able to make a profit.
In conclusion, the following conclusion can be made.
To answer the question of what Forex is, it can be said that it is a system that unites all participants in the currency market, regardless of their location, and serves to instantly exchange one currency for another.
Moreover, the financial market has recently become a place for speculation. Speculation has always been practiced 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 you begin, it's important to understand that stock trading is not a game, but painstaking work that requires a lot of knowledge and experience.
