If you don’t know anything about Forex markets but want to start trading Forex, then you should learn as much as possible about it. You can find out how to trade Forex through articles, courses, and personal consultations with more experienced traders. Let’s talk about the basics in this article.
How Did the Forex Market Form?
The global interbank Forex market (FOReign EXchange) was formed in the 70s of the 20th century when international trade moved from fixed exchange rates to floating ones. The money of the countries participating in the Forex market has ceased to have an official gold content. At the same time, the exchange rate of one currency relative to another began to be determined exclusively by the supply and demand of free market participants, and the constant change in supply and demand in the market causes a shift in the exchange rate in one direction or another, which, in fact, earns a currency trader.
Where is the Forex market located?
Forex does not have any specific trading location. It is a network of foreign exchange dealers, interconnected by telecommunications, scattered throughout the world’s leading financial centers and working around the clock. Forex is called the interbank or over-the-counter market since all transactions are concluded between counterparties by telephone, or using electronic technology.
You can earn on Forex trading in South Africa. Spend some time to find more information about strategies and notions to be a confident trader. On the Forextime blog, you will find everything you need to know — from articles to news to expert analyses.
What do they buy and sell in the Forex market?
Any market involves trade in a particular product. The main commodity of the Forex market is the national currencies of different countries. Almost any currency can be traded through brokers. In the Forex market, currencies are always traded in pairs.
Who trades the Forex market?
The main participants in the Forex market are:
- central banks;
- currency exchanges;
- companies engaged in foreign trade operations;
- investment participants;
- brokerage companies;
- individuals;
- commercial banks.
What do you need to start trading in the Forex market?
Anyone can start working in the Forex market. To do this, you need to choose a brokerage company, open a trading account on the broker’s website and make an initial deposit. The opening of a trading account, as a rule, takes place online. You will need to enter your data in the registration form: full name, email address, indicate your username and password, which will subsequently be used by you to enter the site. After registration, the broker will provide you with a special program for free that allows you to make transactions in the Forex market — a trading platform.
A forex broker is a company, a professional participant in the Forex market, which performs operations with securities on behalf of the client and at their expense based on certain contracts and agreements. Many companies are operating in the Forex market, and a trader can choose the most suitable one for oneself.
How much money do you need to start trading?
The amount of the minimum deposit depends on the brokerage company that you choose for cooperation: from a few cents (micro-account) to several thousand dollars. You can get started by investing, for example, one dollar. To buy 100,000 units of the base currency, there is no need to make a similar amount of money on the deposit. How is this possible?
The trader will have to pay a certain collateral (margin), and the brokerage company will provide them with a loan. The ratio between the collateral and the amount received under it is called leverage. Forex leverage can range from 1:1 to 1:500. Please note that the larger the leverage, the greater is not only the profit but also the possible losses.
How much can you earn?
A trader’s profit depends on many different reasons. The average trader receives between 10% and 50% per month. There are months with super profitability — 100% — 500% and more. This is all very individual.
What is the essence of Forex trading?
The essence of trading on the Forex market is to open a deal to buy or sell currencies and close this deal with the opposite operation (if you sold, then you need to buy, and vice versa). Instead of saying “I bought euros for dollars” or “I sold euros for dollars”, traders use shorter expressions: “Buy euro-dollar” or “Sell euro-dollar” (respectively). It means that we buy the euro-dollar currency pair (euros for dollars), hoping that the euro will fall in price against the dollar, and we, having sold this pair, will make a profit.