1. Forex Explained Simply -How it’s used and How it works-
The Forex Market is the giant of Global Financial Markets and by far the biggest, with it out stripping the Bond, Equity and Commodity Markets.
This is due to the incredible scale of the Forex Market with over US$ 4 trillion traded on a daily basis.
“Forex Market” is surely volatile and super liquidated. That is why there are dozens of millions Forex traders in the world.
Tourism also relates to “Forex”
Most tourists would have come across the word “Foreign Exchange” when they dealt with a bank or bureau de exchange.
Or entrepreneurs who are involved in international commerce could be active in the Forex Market as part of their normal process of importing and exporting goods and services.
If you have exchanged a currency for another, then you have just made a “Foreign Exchange Transaction”.
“Forex” is all over the world and actually really involved closely to our daily life.
More than 90% is Investors
Although both tourism and commercial based transactions account for a large amount of foreign exchange transactions the largest percentage by far relates to speculative business.
In fact some 90% of all foreign exchange (also known as FX) business is speculative.
What we mean by this is that an individual or a business will open and close a FX position with a view of generating a profitable outcome.
However this is not always the case and on occasions loss will occur.
In both cases wins and losses are represented as debits and credits on an investor’s online account.
Forex is “OTC” and “Online”
As an investor who owns an online trading account, Forex Trader never needs to take physical delivery of currency or remit foreign currency.
The reason for this is that an investor will never take possession of the actual physical currency.
That “Forex Trading Account” to exchange currencies online, can be opened with hundreds of Forex brokers in the world.
The Forex Market is not traded on any global exchange but is described as an over the counter market or in short (OTC).
An OTC market has one major characteristic, that being all transactions take place directly between two parties.
These two parties are the Investors and Liquidity Providers.
Liquidity Providers are the Mega-Banks or some huge financial entity that will let investors to exchange currencies.
These Liquidity Providers create huge money flow in the Foreign Exchange Market, and are often called as “Market Maker”, because they decide the price to offer to other parties.
Investors can get access to join that money flow through Forex Brokers, so it works like this:
Investors ⇔ Forex Brokers ⇔ Liquidity Providers
An OTC market lends perfectly adapts to advances in modern technology and is well suited to the internet age.
Investors are therefore able to access this large, dynamic and exciting market from wherever there is reliable internet access.
2. “Trading Forex Online” No need to Call or Visit office, but just One-Click
The internet revolution has transformed the world of investing and trading, it has brought the markets to the masses.
The days when investor have to call a broker to place a trade are long gone. With respect to the Forex Markets the changes enforsed over the years have been extraordinary.
In the mid 1990’s the Forex Markets was the preserve of investment banks, business and rich individuals.
However with the introduction of internet to the general public, scores of companies around the world came into existence offering internet based trading platforms.
With no need to go to an office, exchange or dealing floor; today’s traders can now trade from their own home office or even from their mobile phones.
With Online Forex Brokers, the world of trading has become so accessible investor can trade anywhere, anytime.
Through Online Trading Platform
In order to trade Forex online, all you need is a device to place orders with Internet connection.
Each online Forex broker offers different trading platforms though, normally you can access to their trading platforms through many types of different devices.
For example, the world’s most popular trading platform, MetaTrader4 is available for following devices.
- Windows PC
- MAC PC
- Android Phone
- iOS devices
- and other mobile phones
By installing the trading platform to your device, you can trade Forex 24/5 from anywhere in the world as long as you have internet.
3. What you can Trade/Invest in the Forex Market
The Forex market is dominated by your major currency trading pairs. These are EURUSD, GBPUSD, USDJPY and USDCHF.
Other major pairs include AUDUSD, NZDUSD and USDCAD.
The trading of Cross Currency’s is also very popular. A Cross Currency pair is a trading instrument that does not include a US Dollar component. For example EURGBP, AUDNZD and CADJPY.
There are over 100 cross currency pairs available, and all of them are tradable through online trading platforms offered by your Forex broker.
Cross Currency Pairs are Connected
The movement’s in cross currency exchange rates can give an active trader valuable insights on the strength and weaknesses of underlying moves in currency majors.
For example if the Euro is weakening against the Pound Sterling, Swiss Franc, Australian Dollar and New Zealand Dollar then there is a good chance that weakness will be found in the EURUSD currency pairing.
There are certain programs called “Technical Indicators” to analyze the market price movements. It is very important to study the past of price movement of the pair you are going to trade.
Where and How you trade
MetaTrader4 is one of the most popular trading platform in the world. Majority of Online Forex brokers adopt the trading platform and offer financial services through it.
The MT4 platform offers more than just the currency majors. Exotic instruments such as PLNJPY, NOKSEK and USDCNH are also available to traders.
Furthermore the standard MT4 platform does not exclusively offer Forex products. Investors are also able to trade well known and highly traded equity CFD’s, Commodities, Metals and Indices.
The tradable financial instruments are different in each Forex broker.
4. Forex is “Risky” but you are “Protected”
Trading the Forex Markets could be risky but so is crossing a busy road with eyes closed whilst listening to music on the MP3 player.
Normally all Forex brokers make sure that they provide their clients full support, education, tools and a demo account to prepare them prepare for their trading journey.
This includes learning how to use a trading platform and being familiar with all order types. Additionally, there is education and training that can be undertaken before one decides to trade on a live account.
Forex brokers bring to all their clients a demo platform where an investor can simulate opening and closing positions and testing strategies without risking their capital.
Guarantees Stop Loss and NBP
Also available to the traders are methods to limit the size of the loss that will negatively impact their trading account, by setting physical stop loss levels.
Online Forex brokers protect their investors’ trading account by using automated margin stops, which stop a trading account from going into negative territory if a certain level is hit.
Furthermore, normally all traders are offered with negative balance protection.
This is useful in the unlikely event that market volatility is so great the liquidity dries up and the price slashes like a knife through investors stop and margin level without being automatically triggered.
Such an event occured when the Swiss National Bank decided to no longer support the Euro with no warning.
It is the standard condition to offer traders the ability to trade nonstandard mini and micro lots which limit losses and allow investors to experience a realistic trading experience without taking the risk of losing a significant amount of capital.
IronFX
Comment by Diletta
March 26, 2024
Awesome bonuses, good leverage. A few hiccups, but support rocks!