Forex is an international interbank currency market. Forex trading makes buying and selling currencies. Because of the value of an ever-changing currency, by buying a currency at a lower price and selling it at a higher price, you can make a profit by getting the right currency movements (for example: precisely ensuring the news).
Forex participants are bank banks (central and commercial), pension funds, insurance companies, brokers, dealers, and private investors. Because of the large number of participants and the same transaction volume, many transactions are carried out for several minutes.
Large capital is not needed in trading on Forex, because brokers provide loans – leverage. The size of leverage is equal to one hundred times the amount of the deposit, which means that the trader (the participant who plays on Forex) enters the market with a sum of money that exceeds the amount for a hundred times the transaction.
Trading transactions on Forex consist of 2 parts. First: the trader opens a position with a certain currency pair. Second: He closes the position with this pair. Trading transactions on Forex have closed automatically in a few seconds. However, the very large quantity of transactions made by traders cannot affect prices.
The opening position in Forex trading is a process of requesting a currency from a broker for a certain quantity of currency. The price of the base currency in the first pair is called the quote displayed in the unit of the quoted currency. The pair has 2 figures: Bid – the price of the base currency sold for the quoted currency and Ask – the price to buy the currency. The difference between Ask and Bid is called spread (this is the first source of income for brokers), and points are the minimum price movements that occur. Currency value information is always available for those who make transactions on the Forex market.
Forex trading is done in three ways.
This method involves several trading strategies. Traders who have a lot of experience of Forex develop their strategies in a few years, but several strategies are accepted and truly profitable:
- Daily trading (intra-day short – term trading ) is a short-term deal with the trader for 1 or 2 minutes to several hours. Transactions like this are usually closed on the same day when trading (one day only) and seldom last the next day.
- Trading with the news. Traders who use this trading method can always get a stable profit, by making the right analysis based on the news published. At the same time, analyzing the news and setting the wrong position can cause losses.
- Medium-term trading. Based on this type of trading, traders open transactions for a long period (from 1-2 days to 1-2 months). This type of trading allows the trader to make a large profit if the transaction is kept open not less than a few days. Large capital is needed to support the transaction.
- Technical analysis in Forex trading is the ability to estimate and make the right analysis using various types of chart/chart types (bar charts, Japanese candles, lines with currency pairs, and figures displayed in the chart that provide opportunities to estimate the fluctuation rate of a currency pair.
- Trading carry (Carry trade) benefits from the difference in interest rates of currency pairs.
Using this type of trading, trader transactions remain open for a long time (from 2-3 months to 1 year or more). Trading like this requires a lot of capital. Capital is used to wait for profitable transactions to avoid losses until prices change in the right direction (which is profitable).
Besides, one of the advantages of Forex trading is the working hours that last 24 hours for 5 days a week (from Monday to Friday). Therefore, regardless of the differences in the time of your region and location, you can continue to take part in trading. Trading opportunities on Forex are provided by world financial centers managed by national bank banks that work with international bank banks that hold capital from different countries.
Most of the world’s financial centers are in New York, Tokyo, Paris, Luxembourg, Singapore, and Austria. They allow liquidity support to trade on Forex for a day and a night.