What is Forex?
The exchange rate is a price, that is, the number of currency units needed to buy another currency unit. The market price is determined by the relationship between supply and demand in the market. The exchange rate between the two currencies depends on the mutual influence between institutions and private participants in the FOREX exchange market. Almost all countries have their own currencies – US dollars, pesos, rupees, reais – and are used for transactions between various economic entities.
The currency is also needed for transactions between economic entities in different countries. Therefore, it is necessary to provide for a mechanism for obtaining foreign currency so that all commitments made are fulfilled and accepted by all parties. This demand led to the creation of the foreign exchange market – FOREX. Trading currencies for investment is technically CFD (Contracts for Difference), the name is used for derivatives traded on the over-the-counter market (ie, without special regulations).
What is Forex?
Forex is an abbreviation for foreign exchange (International Money Market). Foreign exchange is the largest financial market in the world, including currency transactions between large banks, central banks, speculators, multinational companies, governments and other financial institutions and the market. Currently, the global average daily turnover exceeds US $ 3.8 trillion. As the exchange rate is the basis of international capital transactions, its liquidity and transaction volume are much higher than in any other financial market.
One of the main differences between the foreign exchange market and other financial markets is that it does not have a trading headquarters like a stock exchange. It operates directly through online banks and brokers. With the development of technology and the increasing globalization of capital flows, individual investors can use foreign exchange transactions and can use the Internet to trade in different countries / regions.
The main objective of the foreign exchange market is very clear: to make a profit due to the fluctuation of the exchange rate of one currency against another. FOREX transactions involve the purchase of one currency and the simultaneous sale of another currency, that is, these currencies are traded in pairs, for example: USD and JPY-USD / JPY (see the figure below).
Investors do not actually buy dollars or yen, but the exchange rate between them. Therefore, when someone trades in this market, he is not buying a particular currency, but a certain PAR (the exchange rate between two currencies). Due to these fluctuations in exchange rates and changes in the relative value of foreign currencies (or between national and foreign currencies), different investment strategies can be constructed, which can lead to profits and losses, as well as on stock exchanges. Values.
Companies and governments operate only 5% of the foreign exchange market. The remaining 95% earn money through speculation. The main speculators are banks, investment funds, the EU and you! More than 80% of transactions are carried out between what we call main currencies (main currencies), which are the most liquid currencies. The main ones are: euro, US dollar, Canadian dollar, Australian dollar, Japanese yen, British pound and Swiss franc.
The foreign exchange market is a market that operates directly between two parties without an intermediary. In the field of international finance, they call it “over the counter” or “over the counter”. There is no exchange or central bank. The largest central geographic market is the United Kingdom (UK), mainly London. According to data from the IFSL (London International Financial Services), its participation in global transactions is estimated to have increased by 31.3% from April 2004 to April 2006. 32.4%.
Other major world centers include the United States (18.2%), Japan (7.6%) and Singapore (5.7%) Between April 2005 and April 2006, business in the foreign exchange market grew 37%, tripling since 2001. This is entirely due to the growing importance of foreign exchange as an asset class, as well as of these funds (mainly currencies and pensions.) The diversity of management platforms on the Internet is also a factor contributing to this growth, as these platforms allow the use of charts and quotes Technical analysis in real time becomes easier.
To become a successful foreign exchange trader, you must have a lot of discipline and market knowledge. Learn trading skills, understand the market, participate in forums, control risks, protect your funds, explain graphics, watch videos, read teaching materials, use methods that have proven to be successful, read expert reviews, share ideas, keep your focus and understand the news, and start trading with a demo account, you don’t need to risk real money. All of this will contribute to successful learning so that you can make the most of FOREX operations.
In my opinion, the most important thing is to try to stop emotions during the operation. Don’t be ecstatic when you win, and don’t be angry or frustrated when you lose. If you do not learn to control your emotions, it is better to look for other things to do, because the exchange will not be your place.
The most important moment in trading activities is the psychological adjustment of traders. It can be said that traders generally get very satisfactory results when trading with virtual accounts (using virtual currency), but when they convert to real currency, the results are very deteriorated, and psychological factors cause this situation The main reason.
Forex is the abbreviation for foreign exchange, also known as the international currency market, in which transactions are carried out to buy and sell certain currencies from one country to another. Large banking institutions and central banks conduct foreign exchange deals, leading the global financial markets, with an average annual growth rate of 25%. With a daily trading volume of more than $ 3.2 trillion, even on all US exchanges, the volume of transactions completed cannot be exceeded. It is the largest and most liquid financial market in the world.
One of the main differences between the foreign exchange market and other financial markets is that it does not have a trading headquarters, such as a stock exchange. It operates directly through banks and brokerages. Until recently, the foreign exchange market was reserved only for banks and large financial institutions, mainly due to the required value margin.
It is difficult for individual investors to enter and operate in this market. Today, that situation has changed and, due to technological advances and the increased interest of individual investors, we have several brokers that, through online trading platforms and real-time quotes and capital leverage systems, allow just over US $ 2,000, many Investors can operate contracts for more than $ 100,000. In order to increase the participation of small investors, a mini account was also created, in which contracts of US $ 10,000 are negotiated with contracts of US $ 500 or more.