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Forex

Forex (FOREX) - from the English language. Foreign currency - "currency". This (Forex) market is a financial market where market participants (currencies) can buy and sell.

Worldwide, the international currency exchange market in Forex is $ 3 trillion a day. Such daily turnover is much higher than the total value of shares that change their owners on world stock exchanges throughout the year.

The ability to earn fast and unlimited income by working with these tools is the reason why many businessmen encourage Forex and commodity markets to work on “low-speed” stock exchanges. Combined with prudent and reliable risk management mechanisms, trading in global markets can be the foundation for long-term financial success.

Forex market

formed in the 70s, an interbank market that has evolved from a fixed currency of international trade to a floating one. At the same time, the ratio of one currency to another is determined in the most precise way - exchanges are based on their mutual ratio, as agreed by both parties.

In particular, Forex is not a “market” in the traditional sense of the word. It does not have a specific trading platform like the stock exchange. Trading is done simultaneously through telephone and computer terminals in hundreds of banks around the world.

Another advantage of the Forex market from the point of view of investors is that Forex is open 24 hours a day and currency exchange does not stop for the whole business week. From time to time (i.e. London, New York, Tokyo, Hong Kong, Sydney, etc.) there are dealers to buy or sell the currency. The stock market stops trading at the end of the day and only resumes the next morning.

Carrying out currency and other operations in the money markets is the most difficult and very specific type of activity called currency trading, which is carried out by valuable specialists - dealers.

There are three types of such operations:

- operations located where the delivery date is 2 working days after the transaction date.
- operations on routes, the delivery period of which can range from a few days to several years.
- exchange rates and options, delivery time in accordance with the currency rules are determined by the exchange.

First, currency speculation belongs to a group of marginal transactions that are not regulated by SEC-type regulators, and the amount of margin or credit is determined only by agreement between the client and the bank or brokerage firm, which allows him access to Forex.

The size of this margin credit actually depends only on the customer’s sales supply and is usually 1:50 or 1: 100. In other words, to get a $ 2000 deposit and a 1: 100 “shoulder,” a customer can make deals worth $ 200,000. For the rest, currency trading accounts work like marginal brokerage capital accounts.

According to various trade, economic and other indicators, the discount rate, central bank policies, time of day, preferences and expectations of participants in the currency game, the exchange rate moves at constant prices for various reasons.

The task of the dealership is to determine the direction of change in the price of the currency and to try to buy the currency or buy the currency that will cause the price to fall, and then to return the income.

The key to successful trading in the Global Forex market is based on the following aspects of the investment process:

- fundamental analysis
- Technical analysis
- risk management
- psychology

The main analysis includes interpretation and evaluation of key economic indicators reflected in news published by news agencies and state statistics bodies. Key indicators are announced at predetermined dates and hours that investors and traders know from specially prepared calendars. This usually differs from the average value of this indicator, the currently expected average value, as well as the maximum to the minimum expected value. Based on this information, an experienced trader may be ready to issue an indicator. Typically, when announcing an important indicator, traders try to close all open positions or at least try to reduce their trading volume so that they do not significantly worsen the trading account of the trader.

A technical analysis is performed to determine the direction of price movements and the timing of transactions. Using technical analysis, we can predict the current price trend. Possible options:

- move up
- move down
- flat

Evaluation of this trend:

- the beginning of the trend
- trend maturity
- end trend

Calculate the amplitude of price change (variability) in the current direction:

- weak exchange rate
- strong exchange rate fluctuations

By identifying these components of price dynamics, we can, with a certain degree of confidence, buy or sell an analyzed instrument. Knowledge of the basics of technical and fundamental analysis only affects the amount of successful transactions in the total volume of transactions.

But you can achieve a great result in terms of the ratio of successful and unsuccessful deals, and at the same time you can always lose. Risk management is clear to solve this problem.

The impossibility of predicting the exact outcome of trading transactions determines the need for the trader to follow a number of important rules aimed at minimizing the risk of incurring losses greater than or expected to occur in each transaction. Strict adherence to these rules is the key to the long-term financial life of every trader.

Skills to apply forex market analysis methods and prudent trading tactics are required, but conditions are not sufficient for the well-being of the investor in the financial market. It is necessary to understand the psychology of market participants, their motivation and driving force, resulting in an understanding of what is happening in the Forex market.

All the positive and negative qualities of a trader are highlighted in the kaleidoscope with the rapid change of market events of each individual and are sometimes crucial as a result of trading. Blind and weak, self-confident and enthusiastic, indifferent and slow, these “financiers” are doomed to fall victim to the market. Being aware of your own flaws and shortcomings will help you avoid breakdowns.

If the trader also learns to correctly assess the psychological state of the market and the behavior of the market population, then the chances of success will increase significantly.

Opening each position is an order to the broker to buy a certain currency for a certain amount of a certain currency.

In Forex, all currencies are traded in pairs. In each pair, one currency is the base currency and the other is quoted. Thus, the main currency in the EUR / USD pair is the euro, and the USD / JPY pair is the US dollar.

The price of the base currency, expressed in units of accepted currency, is called the offer. Each quotation mark consists of two numbers. The first number - Bid - is the price at which the customer can sell the base currency only once, the second - the question or offer - the price at which the customer can buy the base currency. Example: EUR / USD = 1.1903 offer; 1.1906.

The difference between Bid and Ask is called the spread. In the example above, the spread is 3 points. Point (pips) is a change in a reasonable price. Different currency pairs are quoted with different accuracy, ie. the invitation indicates the number of other fractions. Most currencies have four decimal places, only the yen is 0.01. The size of the spread depends on the currency pair, the amount of the transaction, as well as the state of the market.

Before you start trading on a real account in the Forex market, you need to be trained in currency trading, which you can learn independently from the books.

A short article about Forex