Introduction to the Forex market

Introduction to Forex market

The Forex market, which is commonly known as Forex (Foreign Exchange Market) or FX, is currently the largest and the most liquid financial market in the world with a daily trading volume of around $5 trillion  U.S. dollars, which puts it well above other financial markets such as the stock market of the futures market. It is an Over The Counter (OTC) market.

The operation of Forex is based simply on the purchase of one currency and selling another. In this case the investor tries to make money with the rise or fall in prices of a particular currency against another. In Forex the trader can make money with both long positions (buy) or short positions (sell) as the purchase of a currency involves the sale of another and vice versa.
Globally, the currencies are traded through floating exchange rates and are always traded in pairs. The most popular currency pairs to trade in the market are the EUR/USD, GBP/USD and USD/JPY, ie the currencies of the stronger economies in the world. However, there are dozens and dozens of currency pairs that can be traded, so there is a wide variety for the investor to choose, but most trades are performed in the main pairs such as those mentioned above.

The Forex market as such, became operational in 1971 after the fixed currency exchanges were abandoned (see The history of the Forex Market). Unlike the stock markets that operate a few hours a day (the New York Stock Exchance logically operates according with the New York time), the Forex operates 24 hours a day, 5 days a week. This is because at anytime, anywhere in the world there are always banks, individuals and financial institutions buying and selling currencies.

This market involves investors of all types, from individuals to large organizations, central banks, commercial companies and big and small brokers.

In fact, the Forex market does not operate at a fixed location, although there are very important centers of foreign commerce located in cities like New York, Frankfurt, London and Tokyo. Today is a market that is based more on the use of technology, since it operates primarily through the Internet or telephone, which are the most used resources to make transactions by investors both large and small.

The buying and selling of currencies is a key element to world trade and as the prices of the major currencies move against each other constantly, there are always good opportunities to make money with Forex trades. Thus, even in times of crisis when other financial markets remained depressed for months, the Forex has always been in full swing and full of opportunities to make money. And while the major market players make transactions of millions of dollars, the small investors are also present in the Forex.

A great advantage of Forex is that almost anyone has the opportunity to invest in this market without having to invest a capital of many thousands of dollars. What is needed is a bit of money to start (the amount depends on the broker with whom you want to operate) and time to learn how to trade efficiently in this financial market. At this point we should clarify that before investing a single dollar in the Forex, the trader must be educated properly about the functioning of the market, because although it is possible to obtain a very good income from online Forex trading, the investor can also suffer great losses if he does not how to trade properly. One reason for this is the possibility of leverage the trades, a concept that we will detail in another article.

People cannot directly trade in the Forex market as they need to do it through a broker, however, many brokers do not allow to open online accounts with very small amounts. Therefore, before investing in the Forex, the traders should seek information carefully about the brokers that offer the best conditions and fits their budget.

The Forex is a very technical financial market and takes time to learn the basic principles and develop the skills necessary to use some of the tools available to trade properly in this market such as technical analysis and fundamental analysis. But learning these concepts only requires time and dedication.

However, it is not necessary to become an expert to make a profit trading in the Forex. With time and effort is quite simple to acquire sufficient understanding of the system to make money by trading currencies online. In addition to the technical aspect, mental preparation is necessary, since in the Forex, psychology is everything. For example, you can master all aspects of market analysis, but if you do not have the right attitude, everything will end in a disaster sooner or later.

For many people, the Internet is a starting point to learn about Forex trading. While the Forex market can be quite risky as a means of making money – which should be clear from the start – it is an excellent opportunity for those seeking to increase their profits and become economically independent.

In this article we hope to have increased your interest in Forex trading, so you try to learn more about this topic so interesting and become a successful trader in the future, for which this website seeks to provide a little help.



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