What is Forex? What are the factors affecting market volatility and the best trading platforms?
You heard a lot about the Forex market and stock market and would like to test that any of those two? You may ask yourself: What is Forex? What is the minimum level that enables me to enter this world? To what extent may my profits reach or, my losses?
Initially, we point out that the forex is a known or virtual place in which dealers gather, with a view to conducting sales and purchases.
It has an appropriate degree of openness and transparency so that its effects will be reflected on all dealers and their dealings, so prices are set down, up, or fixed.
Also, the changes and developments that occur in the dealing movement are monitored easily.
Hence, You can measure its impact, know its trends, and analyze these trends to predict what it might be in the future.
Financial, legal, and economic transactions are carried out on Forex in terms of the exchange process between the seller and the buyer, and the procedures for transferring ownership.
There are many types of exchanges; There are commodity exchanges such as the London coffee exchange and the wheat exchange in Chicago, and there are metal, bond, and stock exchanges, among others.
In this article, we will look at currency trading.
What is Forex?
This market is the most famous and popular for those wishing to enter the stock market, due to the huge advertising campaigns on the Internet, where the average daily trading volume is 4 trillion dollars.
The developments in communications technology and the Internet in the twenty-first century contributed directly to the nature of trading in financial markets, which led to the conversion of financial transactions into electronic trading.
This resulted in a change in the world of investments, and customers became using computer systems to implement private sales and purchases in securities; In order to reach the implementation of deals between the parties in easy ways.
What is Forex?
There is no central Forex location. Rather, it is an electronic network of banks, brokers, institutions and individual traders, most of which trade through brokers or banks.
All of these entities have currency needs, and can also speculate on the direction of currencies.
They publish their requests to buy and sell currencies on the network, so that they can interact with other currency requests from third parties.
The Forex market is open 24 hours a day, 5 days a week, excluding holidays.
Currency trading continues on vacation, if at least the country / global market is open for business.
The largest and most important foreign exchange markets are in major global financial centers, such as London, New York, Singapore, Tokyo, Frankfurt, Hong Kong, Sydney, and Paris.
When trading in the Forex market, you buy or sell the currency of a particular country, in relation to another currency. But there is no actual exchange of funds from one party to another.
This is what happens in foreign currency exchange places. Think about a tourist visiting the pyramids in Egypt, who might convert the physical dollar into a currency in Egyptian pounds (and commission fees may be charged to do so), so that he can spend his money while traveling.
But in the world of electronic markets, traders usually take a position in a specific currency. Hoping there will be some bullish movement and strength in the currency they are buying or weakening if they are selling, so they can make a profit.
The currency is always traded in relation to another currency. If you sell one currency, you buy another, and if you buy one, you sell another.
In the world of electronic trading, profit is achieved on the difference between your transaction prices.
Forex Market Features
What distinguishes the Forex market is that the investor can open and close positions at any time.
In less than a second, you can end or open your position. And given the huge liquidity, there are always sellers and buyers at any price, unlike the stock market.
You can also trade in small amounts, by opening an account and trading with any amount you want even if it is $ 100, unlike the stock and bond markets.
It also helps in providing the company with which you create an account with a tool called leverage, and it is considered one of the most important characteristics of the foreign exchange market, where you can at a small amount have a large purchasing power.
For example, if the leverage is 1: 100, you can trade 100 times your capital.
How is trading done electronically?
When buying a certain amount of the currency, the price of which increases later, we will have a profit, but if the price falls, there will be a loss.
When we sell a certain quantity and there is a fall in the price, we also have a profit, but if the price increases, we will have a loss.
This process is done through a broker between the trader and the market. It is the company that created your account and deposited your money with it.
This company receives a commission on every sale or purchase made in your account.
One of the best ways to get to know forex is to know how prices move in real-time and place some deals with a demo account, which is a beginner-friendly account that is traded on virtual sums.
It is like the real account, except that the capital is virtual. Any suitable for training.
Most brokerages provide free demo trading accounts, and they operate online in the same way as direct trading accounts.
What are the best trading platforms?
The trading platforms are the most important parts of Forex.
As a Forex trader, most of your time will be spent on your trading platform to do analysis and make trading decisions, so choosing an easy to use and reliable trading platform is essential.
In addition, trading platforms provide charts for all currency pairs and various types of instruments, for financial market analysis, and direct keys for buying and selling transactions.
Trading platforms also offer real-time quotes, to allow the user to make wise trading decisions.
There are some trading platforms provided by financial brokers, including Metatrader, Zulutrade, and Ninjatrade.
The most popular is the MetaTrader platform among Forex traders.
MetaTrader 4 was launched in 2005, and it is a type of program that connects to various trading systems and allows trading on it via computer or smartphones. In other words, the MetaTrader platform is the link between the two.
This is why Forex traders use this program mostly, to choose the broker that they want to trade with, as long as it is compatible with the Forex system.
In this way, the MetaTrader platform acts as a bridge allowing you to trade with the broker you choose within the same platform.
MetaTrader has a simple and effective interface combined with advanced trading tools that can have a significant impact on your trading performance.
Since it has capabilities for testing and simulating the market, MetaTrader 4 can also be used as a Forex trading training program, which can be very beneficial to traders without much experience.
Today, MetaTrader has two versions: MT4 and MT5, created by MetaQuotes Software Corporation in 2005 (MetaTrader 4) and 2010 (MetaTrader 5).
This company is Russian and it is a leader in the financial software market.
What is leverage?
Financial Leverage means the use of capital borrowed by a broker when opening a position.
Sometimes, a trader may want to apply leverage in order to obtain funds above the minimum balance, as part of his investment strategy.
Leverage is applied to the multiples of the capital invested by the trader, for example 2x or 5x or higher, and the broker lends this amount of money to the trader at a fixed rate.
Leverage can be applied to both buy and sell deals. It is very important to note that any losses will double, just as with profits.
Influencing factors and risks
The risks involved in trading in the Forex market are much greater than what financial companies are trying to portray.
No one – no matter his experience – can give an accurate and certain analysis of what can happen; Given that the market is affected by several factors, we mention, among others:
- Economic government data, the most important of which are issued by central banks and which directly indicate the economic situation; Then it has a direct impact on the direction the currency moves up or down.
- Political news, which is more related to the security aspect of countries whose currencies are mainly traded. The occurrence of any security conflict in the decision-making places in the world has direct implications for the exchange rate of currencies.
Personal experience tips
The psychological factor plays an important role in determining the extent of success in currency trading.
It is a given in the Forex world that an investor, whatever his experience in analyzing charts of currency pairs and economic data and the continuous follow-up of political news affecting the money market, must remain cautious and use a tool called determining profit or loss.
That is, when a speculator or investor makes a purchase or sale, he must determine the value of the profit and loss he deems appropriate for this process.
Maintaining transactions without closing them pending a change in the direction of market movement, exposes the investor’s account to huge losses that may, unfortunately, amount to bankruptcy.
What experience do you need to start trading in Forex?
The most important thing you need before starting Forex trading is to practice and learn. Before you even think about trading Forex, you should learn the basics. Most brokerage firms offer online educational resources of various types.
You can read articles, watch videos, track sessions, and more. In addition, there are many online resources unrelated to specific brokers. There are a large number of websites that can teach you about trading in Forex through articles and videos. Of course, there is always a more traditional path by visiting the library and reading books related to trading in Forex. Since there is so much information available, it is easy to feel confused. Take your time and do not rush to start trading currencies so that you neglect to learn how the market works and understand the risks associated with it.
When you learn the basics of trading in Forex, you should consider a brokerage firm. Unfortunately, there is a great deal of honesty in Forex brokerage. Make sure that the company you choose has real certificates, proven success, clear legislation, and ways to secure your money. It is recommended that you start with a small amount of money so that you can determine whether the broker you choose meets your needs. At the very least, make sure that the broker allows you to use trial trading at first.
A demo trading account is what will provide you with the experience you need to start trading forex. When you learn the basics and prepare to start shaping a trading strategy, you will need to try different ways to trade forex in order to find the method that is right for you. The time allotted, and financial philosophy are some of the factors that go into deciding what is the best trading plan for you. You can even copy an expert trader to test his strategy. The experience you will gain from demo trading is very valuable and will be essential to your success in Forex trading.
Thanks for reading