Forex is the name for the foreign exchange market, which is where people buy and sell different currencies from around the world. The market started in the 1970s when free exchange rates became possible. It is now the largest financial market in the world, with a daily turnover of US$1.9 trillion. To put that in perspective, that is more than thirty times the total daily volume of all the other US stock markets.
Forex currency exchange takes place on an Over The Counter (OTC) or interbank market. This is different from normal stock markets, where trades happen on exchanges in specific places. This means that all transactions between brokers are done electronically.
Forex is a true 24-hour financial market because of this and the different time zones around the world. The day starts in Australia and goes all the way around the world as the major financial markets in Tokyo, London, and New York open. So it's always possible to find someone who wants to buy or sell foreign currencies. This gives investors the chance to react to price changes caused by economic, social, and political events at any time of the day or night.
There are two main reasons why people use Forex to trade currencies. About 5% of Forex trades are done by multinational companies and governments that buy or sell goods and services in a foreign country and need to turn their profits into their own currency. Forex lets them protect (or hedge) their profits so that even if there are big changes in currency, their profits won't go down.
The other 95% of Forex trading, on the other hand, is done by people or organisations who want to make money quickly. Forex lets you trade almost any currency, but 85% of all trades involve the "major" currencies, which include the US Dollar, the Euro, the Japanese Yen, the Swiss Franc, the British Pound, the Australian Dollar, and the Canadian Dollar.
When you trade on the Forex exchange, you buy one currency and sell another at the same time. If you buy USD/EUR, for example, you buy the US Dollar and sell the same amount of Euros. To close your position, you must buy Euros and sell US Dollars.
The laws of supply and demand affect the prices of all currencies traded on Forex. If more people want a currency than there are of it, the price goes up. If, on the other hand, there are more currencies than people want to buy, the price of a currency will go down.
Forex trading has a number of important benefits that make it a very appealing way to gamble.
First, because of its size and lack of exchange controls, it's hard for anyone or any group (including central banks and governments) to have a big impact on prices for a long time. This means that you can put your money on the market knowing that it will be competing with investments from all over the world on the same level.
Second, because the market is so big, there is a lot of money in it. So, unlike stocks and shares, where it might be hard to sell some investments, you can open and close Forex trades almost instantly because there are always a lot of buyers and sellers from around the world.
Third, it's not hard and doesn't cost much to start trading Forex. To open a trading account, all you need is an internet connection, a broker, and maybe $500 to $1,000. Once you have these things, you can trade from Sunday afternoon to Friday evening, 24 hours a day. And because information is available on the Internet, you can find all the information you need for analysis and making decisions.
Fourth, because currency prices change every day and you can use margin trading to multiply your capital (often up to 100 times), you can make big short-term profits with relatively little money.
But because currency prices change quickly and there is a lot of risk in Forex trading, it is important to be careful when choosing which trades to make.
There are two main ways to make decisions when it comes to Forex trading: technical analysis and fundamental analysis.
To find trading opportunities, technical analysis uses price charts, trend lines, support/resistance levels, highest price, lowest price, transaction volumes, and other mathematical formulas. This is because people think that everything that could affect the price of a currency has already been taken into account by the market.
The most important thing is that technical analysts don't try to beat the market. They are happy to predict small changes in the short term by looking at patterns from the recent past and assuming that history will repeat itself. The main problem with this method is that all of the results are based on the past and can't always be used to predict what will happen next.
Fundamental analysis looks at things like the economy of the country the currency is used in, how stable the government is, the number of jobs, the number of businesses, interest rates, tax policy, and a wide range of other economic indicators. But before you make investment decisions based only on these factors, you should think about both technical analysis and the fact that market expectations can affect the price of a currency just as much as reality.
