Get to know the Forex market and Forex trading.

[tony hugre]

Get to know the Forex market and Forex trading.

Forex (Foreign Exchange) is a market that trades foreign exchange. The price will fluctuate according to the demand and supply of each currency. Which may depend on many factors Whether interest rates Inflation, oil prices, gold prices, economic conditions, national situations Domestic and international events Including the announcement of important numbers of each country, such as unemployment, etc. The currency exchange rate is very sensitive to the surrounding factors.

Trading large currencies such as US Dollars (USD), Euros (EUR), Pounds Sterling (GBP), Yen (JPY) will have very high liquidity. Because there are many players and price changes all the time. In the past, players in the Forex market were restricted to large financial institutions such as banks or insurance companies. But now With the advent of online trading systems Small investors like us Able to invest through the online trading system of the broker company Which acts as an intermediary to send purchase / sell orders to the foreign exchange market as soon as they are received
We can summarize the characteristics of the Forex market as follows.

    Is the largest financial market in the world Open for trading 24 hours a day, except Saturday, Sunday and public holidays. Trading starts from the morning market in Australia, Asia, Europe and the rest of America's business days.
    Highly liquid Because someone has bought And many sales people Resulting in a very high trading volume compared to other investments
    High risk Because the exchange rate is very sensitive to factors around Which is considered an opportunity to use to make a profit quickly And at the same time May also lose quickly as well
    Profitable both up and down. In one currency pair Investors can open either a buy or sell position by opening a buy position if they expect the price to rise. And open sales positions if prices are expected to decrease
    Use low investment Not only is it able to generate high profits with leverage, but on the other hand, leverage also leads to very high losses.
    Low trading fees When compared to other types of investments Many brokers do not charge any trading fees. But will charge you from the bid / ask price spread, also known as a spread. Currency pairs that have a lot of trading have a narrow spread.

Forex trading is represented as a currency pair. For example, EUR / USD = 1.105965 means 1 Euro is equal to 1.105965 US Dollars. Buying EUR / USD means buying EUR and selling USD and in contrast, selling EUR / USD means buying and selling USD and selling EUR. Examples of important currency pair trading include EUR / USD, USD / JPY, GBP / USD, USD / CAD, USD / CHF, AUD / USD and NZD / USD.

Like investing in shares When investors in the Forex market see trends in currency pairs For example, if the EUR is expected to weaken against the USD, investors may order to sell EUR / USD at the current price, if our predictions are correct and the EUR / USD price is correct. Decreasing, we can also make a profit by closing sales positions The profit will be the difference in price. Multiplied by the number of units bought

Let's look at an example. From the forecast of the unemployment rate in the US Which means increased economic strength Should result in the US dollar appreciating against the euro. In other words, EUR / USD is likely to decrease. Therefore, we decided to open a position to sell EUR / USD at a bid price of 10,000 1.10288 and with a leverage of 50: 1, the cost incurred is (1.10288 * 10,000). / 50 = $ 220.576 (instead of having to spend $ 11,028. which, if the forecast is correct and the EUR / USD decreases, we can close the position immediately, as at ask price 1.09052 in this example. We can make a profit (1.10280-1.09052) * 10,000 = $ 122.8

And with the characteristics of Forex that have dramatic price changes Highly liquid Also able to use leverage to create high profits with low investment It can be said that investing in Forex is suitable for high-risk investment investors. Focus on making profits in a short time.

[Solire]

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