Summary about Forex

On Nov 23, 2014 | In Belajar Forex | by myfbs

What is Forex?

You have heard the word ‘Forex’, but have only a vague idea about what it means? The time has come to find out. Read the short tips below to learn what the currency market is and how to make money on it.

1. What is Forex?

Forex, FX – short for ‘foreign exchange’ – is trading currencies of different countries against each other.

For example, you may buy the euro while simultaneously selling US Dollar. This is a common Forex transaction. There are 2 currencies, so you call it a currency pair. There are many different pairs: EUR/USD, GBP/USD, USD/JPY, etc. The exchange rate is expressed through a quote like EUR/USD = 1.3000.

The currency to the left of the slash is the base currency, while the currency on the right is called the quote or counter currency. The base currency (in this case, EUR) is always equal to one unit, and the quoted currency (in this case, USD) is what that one base unit is equivalent to in the other currency. The quote means that 1 EUR = 1.3000 USD. In other words, 1 euro can buy 1.3000 US dollars.

When you buy/sell one currency against another, it means you open a long/short position on this pair. For example, if you expect the euro to appreciate against US dollar, you open long position on EUR/USD. As some time passes and the price of EUR/USD rises, you close the position and get the profit. The amount of profit depends on how much the rate of this currency pair has increased during this time and the size of your position.

Traders who expect the prices to rise are called ‘bulls’, while those who expect a decline are referred to as ‘bears’.

2. Who trades at Forex market?

There are many different players at the FX market. Some trade to make profits, others trade to hedge their risks and others simply need foreign currency to pay for goods and services.

In 2010 daily FX volume reached $4 trillion increasing by 20% from 2007, according to data from the Bank of International Settlements (BIS).

FX market is decentralized. In other words, there is no physical location where investors go to trade currencies. FX traders can use the internet to check the quotes of various currency pairs from different dealers. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers. The main participants of trading are commercial banks, so currency quotes are set at the interbank market. You can obtain access to the interbank market through FX broker (see 5).

3. Why become a Forex trader?

  • You can get extremely big return in comparison with you initial deposit.
  • You don’t need large amount of money. In fact, you can start with only 5 USD.
  • You will get a vast knowledge and experience in finance.
  • You have your own business and depend only on yourself.
  • You are free to manage you time as you wish.

4. When is Forex market open?

FX market is open 24 hours a day, 5 days a week. There are trading sessions which correspond to the time during which stock markets are open in a particular region of the world. Usually trade volume is higher at the intersection of the sessions. FX day always begins in Australia and New Zealand, and then spreads to Asia. After that it’s the turn of Europe and, finally, the United States and Canada join in.

You can trade anytime you wish during the working week. You can open you currency position for a couple of hours or even less (intraday trading) or for a couple of days (long-term trading) – just as you see fit.

 

Trading sessions (GMT)

Summer (aprox. April – October)

Winter (aprox. October – April)

Australia

00:00-06:00

23:00-05:00

Japan

00:00-06:00

00:00-06:00

UK

07:00-15:30

08:00-16:30

USA

13:30-20:00

14:30-21:00

 

5. How to get started?

FX trading is typically done through brokers who provide you access to the interbank market where all the trading takes place. It will take you a couple of minutes to open an account and begin your trade.

You can place orders to buy/sell currencies to your broker with just a few clicks. When you decide to stop your trade, the broker closes the position on the interbank market and credits your account with the gain or loss – these operations will take only a few seconds.

6. Which technical tools do I need for trading?

All you need to trade currencies is an internet access. Trading platform for FX is called Meta Trader 4 (MT4) and it can be easily downloaded from here.

You may see the example of your trading terminal window below:

7. How can I predict where the exchange rates will go?

As any market, FX market is driven by supply and demand:

  • If buyers exceed sellers, prices go up.
  • If sellers outnumber buyers, prices go down.

There are many different factors which influence supply & demand for every particular currency and, consequently, its exchange rate vs. other currencies. For example, national economic performance matters a lot. If Australian GDP is higher than expected, with all things equal Australian dollar will appreciate versus its counterparts and you can make a profit on buying AUD/USD. You may learn about all important events from our economic calendar.

Moreover, there are so called technical tools & indicators. When you see a currency pair chart in your trading terminal, it’s assumed that this chart reflects all information available to the market. As a result, you can use the previous price action to foresee the future. According to this concept, previous highs and lows represent important levels where the currency pair may linger and reverse. If such level is breached, a big move may follow and a big move means good profit opportunities. Moreover, you will be able to identify trends – rising, descending and sideways – and open your positions in direction of a trend getting profit.

You can learn more about these things when you get started. Our analytics will be very helpful for this purpose.

8. Why is this site useful to me?

This site is you guide to FX trading.

Firstly, you will find here the latest economic and market news one needs for successful trading. Our team will keep you updated and guide you through the constant stream of financial data, so that you will be focused on really important things.

Secondly, you will gain access to currency forecasts and recommendations from the most professional traders and analysts.

Finally, you will be able to communicate with your fellow traders from all over the world, share opinions and strategies, and make new friends who share you interests.

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