Forex is an international financial market on which currency exchange is carried out. This name comes from the English foreign exchange, that is, "foreign exchange". Forex market needed for the normal functioning of the world economy and to ensure the exchange of capital between different countries. Forex trading involves central banks of different countries, companies doing international business, commercial banks and various traders (speculators).
In Forex, major convertible currencies are traded about each other. The most popular pairs are euro/dollar, Japanese yen/dollar, British pound/dollar, U.S. dollar/ Swiss franc.
Each of the Forex participants has its own goals and objectives:
National banks intervene to stabilize the exchange rate of their currencies;
traders come to Forex to exchange earnings for their national currency or, conversely, to buy foreign currency to pay for contracts abroad;
commercial banks have their own business, which is to quote foreign currency for buying and selling. The difference in buying and selling price is called the quote spread, which is their income;
speculators use Forex as a source of solid income for those who know how to play the difference in exchange rates, making a lot of profit. And for this, you do not need to have a master's degree in economics.
What is Forex?
Many people call Forex exchange, but this is not entirely true. Unlike stock exchanges, Forex operates 24 hours a day, because the world's banks are located in different time zones. Besides, Forex is a virtual market, and you can play it from anywhere in the world: from Moscow, New York or the beach in Bali. The main thing is that you have access to the Internet the guarantor of the transaction. This intermediary for small and medium clients is the prime broker with whom the contract is concluded. It should be understood that a small trader will not be able to directly enter "the same Forex" simply because of lack of funds, because of the standard size of the lot in the Forex market - 5 million U.S. dollars.
The currency exchange rate changes every minute - this is the fact that the idea of playing Forex is based on. For example, if you buy a Euro for $1.2 and the next day it rises to $1.3, you can sell it and make a profit of $0.1. Of course, if you use small amounts, your income is small, so you can only talk about tangible earnings in Forex when you invest at least tens of thousands of dollars.
And you can earn on both rising and fall of the rate. That is, either buy cheaper and sell more expensive or sell the currency at a higher price and repurchase it when the price falls. The last way of earning is hazardous, has many limitations and conditions, and therefore is not strongly recommended for beginners.
Currency rates are influenced by various factors: policies of national banks and economic indicators, political changes, force majeure (e.g. natural disasters, accidents at large enterprises, terrorist attacks and even weather conditions), as well as rumours, moods and expectations of market participants. Despite all this, Forex is relatively stable - the fall of one currency always leads to a change in the rate of another. An experienced trader can take advantage of this with a lot of benefits for his wallet.
Where do I start?
All you need to start playing at Forex is a computer with internet access and a reliable broker. You can get access to trading only through a brokerage company. However, according to statistics, almost 90% of novice players who have decided to learn Forex, lose money and quit this activity. Why?
There are several reasons for that, and one of the main reasons is the lack of information. Often people start playing Forex, having read only a couple of small articles on the Internet. But to navigate in the world of finance, it is not enough, because your counterparties will be people who know the world economy, fundamental and technical analysis at a very high level. To make money on Forex, you need to make these professionals a worthy competition. If you seriously intend to make money on the foreign exchange market a source of income, invest time and effort in your education. Today there are a lot of companies that train and advise beginner traders. Read special literature, attend seminars of experts on trading on the international currency market - all this will give you an advantage over those who have decided to play on the stock exchange without knowing all the details.
How much money does it take to learn to play Forex?
If you are a beginner trader, the correct answer is no. Before risking real money, it makes more sense to try your hand at opening a demo account.