Key Upshots
We will outline the most important Forex lingo one by one as we unwrap them and help you understand them.
- Forex Trading takes place in a global marketplace for buying and selling currencies
- The term “FOREX” is an acronym of FOReign EXhange (FOR+EX=FOREX) and is commonly abbreviated as ‘FX’
- The Forex Market is the largest financial market in the world with a daily turnover of more than
- You only need your phone or PC, and an internet connection to start trading
- The trades that take place in the Forex market trickle down to everything in our day t day life, from the price of bread, clothing, to the amount you pay for your flight when going on vacation
What is Forex Trading?
In the simplest form, Forex Trading is the buying and selling of currencies. A Forex Trader buys sells one currency in exchange for another at the prevailing exchange rate. The exchange rates for currencies keep on fluctuating according to the forces of demand and supply. If you have ever exchanged any currency for another, you participated in Forex Trading.
Currency trading happens in the global foreign exchange market that operates 24 hours a day, from Monday to Friday. No trading happens over the weekend. There is no physical exchange for this kind of trading, so it takes place over the counter (OTC).
Central banks and a network of global financial institutions over the OTC market, and hence there is no central exchange like the London Stock Exchange or New York Stock Exchange. In case you are wondering about its size, the FX market is the largest and most traded market with a daily turnover of more than US$ 6 trillion. This is bigger than all the world’s stock markets combined. Many private and individual investors participate in this market because it offers them multiple advantages that are not present in the other financial markets.
Why Forex Trading Matters for Average Consumers
A vast majority of Forex volume comes from institutional traders such as banks, hedge funds, and multinational corporations. These players may take positions in the foreign exchange market for speculation purposes, or to hedge against fluctuations in currency exchange rates. Eventually, we are all affected in one way or another. For example, the amount of money we pay for exports or to travel abroad changes when currency exchange rates fluctuate.
If many traders buy the US dollar and its value rises relative to the Euro, It will be cheaper to shop in Europe with US dollars. The reason is simple; the US dollar is the stronger of the two currencies. So, you can buy more Euros with your US dollars. On the flip side, if the US dollar weakens corresponding to the Euro, holders of the US dollar will be at a disadvantage when shopping in Europe. It’s essential to watch exchange rates if you are planning to travel or shop abroad.
What Moves the Forex Market
Currency prices in the Forex Market are controlled by supply and demand from bulls and bears. However, there are additional factors that come into play, such as macro-economic forces.
For example;
The central bank interest rate benchmark for any given country influences how investors buy or sell the currency of that country. Consequently, the demand and supply of buyers and sellers, which lead to the spot price.
Socio-political factors and the general pace at which the economy of a country is growing are key ingredients in the final price of a currency. Is it starting to get tough? Well, don’t be scared. Understanding how the Forex Market moves us easier than you may imagine. We will break every information into small chew-able particles as you keep learning from us, so make sure to stick around to the end.
What Moves the Forex Market
Currency prices in the Forex Market are controlled by supply and demand from bulls and bears. However, there are additional factors that come into play, such as macro-economic forces.
For example;
The central bank interest rate benchmark for any given country influences how investors buy or sell the currency of that country. Consequently, the demand and supply of buyers and sellers, which lead to the spot price.
Socio-political factors and the general pace at which the economy of a country is growing are key ingredients in the final price of a currency. Is it starting to get tough? Well, don’t be scared. Understanding how the Forex Market moves us easier than you may imagine. We will break every information into small chew-able particles as you keep learning from us, so make sure to stick around to the end.
Three Ways to Trade Forex
Depending on your goals, you can opt for any of the following main methods of trading Forex.
- Spot Market: Also called the cash market. Just like the name suggests, this is where trading starts and ends on the spot. For example, a transaction for exchanging the dollar for the Euro takes place immediately at the prevailing market rate and closes as soon as the settlement is made.
- The Forward Market: The forward market “forwards” transactions. Instead of instantly executing a trade at the current market price, you can enter into a private binding agreement to transact an agreed-upon amount of money in the future, at a specific locked exchange rate.
- The Futures Market: This market allows traders to buy assets under a standardized contract with a promise to deliver in the future. This transaction takes place in an exchange.
Investors trade in the spot market to speculate and invest in the futures and forward markets primarily as a way of hedging against currency price fluctuations in the future. We will touch more on these models at a later stage, if you decide to pursue Forex Trading, after reading this article. We hope you do.
When Can You Trade Forex?
Forex Trading is perhaps the most flexible job you can ever have. The market is continuously open 5 days a week, so you can find a time that suits you if you’re a trader. There are specific times when the market is most active. Traders who take advantage of these times hardly run out of trading opportunities. Let’s take a look at a typical day.
Forex Market Hours
| Time Zone | EST | GMT |
|---|---|---|
| Sydney Open | 04:00PM | 09:00PM |
| Sydney Close | 01:00AM | 05:00AM |
| Tokyo Open | 06:00PM | 11:00PM |
| Tokyo Close | 03:00AM | 08:00AM |
| London Open | 03:00AM | 08:00AM |
| London Close | 12:00PM | 05:00PM |
| New York Open | 08:00AM | 01:00PM |
| New York Close | 05:00PM | 10:00PM |
Can you Get Rich by Trading Forex?
This is the question that every new trader asks when they first come across Forex Trading. Just like any industry, building wealth from Forex is a factor of commitment and time, unless you’ve got ice in your veins. Traders make money in Forex by predicting what currency will gain and lose value. If you’re wrong, you lose money. Not so much like a lottery. You will have technical and fundamental analysis to help you analyze the market and find a good trade to take. The same information needed to make the right decision is available for everyone, but what sets people apart is their skills when it comes to interpreting this information. That’s where we come in. If you’re a new trader, invest time and learn how to trade the financial markets professionally with our free Forex Trading course.
Warren Buffet was quoted in 1988 saying that if you’ve been in a poker game for 30 minutes and you don’t know who the patsy is, you’re the patsy.
Forex Trading can be like a poker game when you lack proper skills. Professional traders have powerful trading tools to take advantage of any profitable market conditions. You’ll end up losing your money to them if you’re not a good trader. Statistics show that 90% of Forex Traders never see the light. This means you’re racing to be in the top 10% of all Forex Traders in the world if you’re thinking about success. Does this mean Forex Trading is impossible to crack? Not at all. These are the statistics across every other industry. Out of all over 211 national teams in the world, only 31 qualify for the WorldCup. Similarly, only 60 players out of thousands of eligible basketball players get through to the NBA every year. So, yes, you can get damn rich through forex but you need to be ready to work your knees out.
There are real-life stories of traders like Tim Sykes who raised $12,000 to over $1.6M while in college. So you can also do it. But you will need to build your skills. Some of the most important traits that can make you a successful trader are:
- Confidence- To steer from fear and believe in your strategy.
- Dedication- To want to become the best Forex Trader there is
- Discipline- To remain calm in your trading and follow your trading plan to the latter
- Flexibility- To be able to adapt to new market conditions and trade them as they come
- Patience- To wait until the trade entries with the highest probability can show up before you trade.
- Self-control- To trade only when needed, and use the right level of risk
Why Trade Forex
So many people are choosing to trade Forex and you might be wondering why? There are countless reasons for doing that, and if we ask ten people, we might end up with ten different answers. The primary reason is to make money, but other factors attract investors too. Here are some of them:
- The Market Never Sleeps
The Forex market is a 24 hour five days a week market because there is always an open session in one or another part of the world. This gives investors the flexibility to trade when at a time that suits them. There is no better job than one where you set your working hours. - Long and Short
Forex traders don’t care about the direction of the market because they can trade either long or short. There are no restrictions to this. This means they can profit whether the market is going up or down. - Transaction cost
The cost of trading in the forex market is almost negligible. Apart from spreads and very low commission, there are no other charges such as stockbroker commissions and account management fees. - Liquidity
A daily turnover of over US$ 6 trillion means there is enough liquidity for traders to take positions anytime. - Accessibility
If you want to learn Forex trading as a beginner, you should know that this market is accessible from any part of the world as long as you have internet. Also, it doesn’t require a lot of money to start trading Forex today.
Final Thoughts
Knowledge is power. You’re now more powerful than before, having learned about what goes on in the Forex Trading world. It is an interesting field that sets you apart from the rest of the world as long as you can focus and make a great trader out of yourself. Everyone would want a flexible well paying job. A job you can do from anywhere in the world and there is no one to boss you around. Nothing gives you all those privileges in one plate more than Forex Trading. So you think this is for you, we are more than happy to guide you as you learn Online Forex Trading for Beginners from the best. Remember this is not a get rich quick scheme, neither are we going to force knowledge into your brains, so spare some time every day and come to our website for your studies until you’re a good trader. If you feel Forex is not for you, well and good. We will be waiting to hold your hand in case you reconsider.
