What is FOREX? Learn the Forex market for beginners
Forex stands for Foreign Exchange, also known as FX, spot FX, foreign exchange market ... this is the largest financial market in the world, with a daily trading amount of up to 5.1 trillion. USD (as reported by World Bank 2016). In short, Forex is a decentralized market for the exchange of currencies around the globe.
The beginning of today's Forex market began in 1971, after the global economy changed from "gold standard" to free currency. This step comes from a variety of factors but is generally influenced by the fact that the US officially withdraws from the Bretton Woods monetary regime, allowing the exchange rate to float.
Foreign exchange market - Forex is a currency exchange market with great value. As you can imagine: If the New York Stock Exchange is worth up to US $ 25 billion / day, this number is still very small compared to US $ 5100 billion / day of Forex. Because all transactions, purchases, exchanges ... between countries around the world must go through the foreign exchange market.
Participants in the Forex market are financial institutions including international banks, central banks, financial funds and large trading companies; Trained individuals (traders) account for about 7%.
So what is the "commodity" of Forex? The answer is CASH. Foreign exchange trading is the activity of buying one amount of money and selling another amount of money at the same time. Money is traded through brokers or directly in pairs; for example EUR / USD or GBP / JPY.
However, individuals cannot participate in this market on their own, but must through a broker; commonly known as brokers - the Forex floor
Why is Forex attractive so many people?
As you know, Forex is a currency trading market between countries around the globe, so transparency is a certainty. In addition, traders who only need to invest a small amount of capital can participate in the Forex market and make a profit in a short time.
- Easy access to Forex knowledge.
- The Forex market is open 24/7 throughout 5.5 days / week.
- You can trade anytime when the market is open.
- The system of forex leverage is high, so it is likely to bring a greater return than the small initial investment.
- You can trade anywhere, just with a laptop or smartphone with an internet connection.
- The highest liquidity in all forms of investment
- Do not manipulate prices by any organization or individual
How to profit on Forex
To make a profit from this market, you need to understand the simple concept as follows: You buy a currency pair at a low price and sell it at a high price then you will make a profit from that difference. . But when you start trading, there will be a big question here, when you should buy or sell that currency pair.
Currency rates are determined according to the supply and demand of the global market. Therefore, you need to catch and update all the information about the forex market, to be able to accurately predict the upward and downward trend of the exchange rate to help you determine the appropriate time to buy & sell.
- Fundamental analysis
The basic analysis is the monitoring and updating of economic and political news in countries. For example, if there is information about unemployment in Canada declining, this means that the value of the Canadian dollar (CAD) will increase. So you should sell USD / CAD so you can profit from this trade!
- Analysis chart
You can use currency exchange charts to make predictions, this is similar to chart analysis in other financial markets such as stocks, cryptocurrencies, binary options, etc.
In Vietnam, basic analysis and chart analysis are often referred to as news analysis and technical analysis. With the school of technical analysis, you need to learn how to read charts, refer to many technical models that can bring high profit margins.
The advantages of the Forex market
#1. High profit when trading at reputable Forex floor
Investing in Forex for many people is not only a profession but also a great way to make big profits in the shortest possible time. The profits made by real Forex trading are much higher than inflation or bank interest rates. Forex investors can receive very high personal income from reputable Forex exchanges.
#2. Profits earned regardless of market trends
You can make a profit by trading on the Forex market regardless of whether the exchange rate goes up or down. By simple, you are holding both the right to buy and sell any currency. For example, if you want to trade on USD / CAD, if USD increases, you place a buy order and make a profit, otherwise you place a sell order and make profit. With Forex, you don't need to worry about market trends, and easily get high profits in a short time. This is an outstanding advantage between Forex and securities.
The characteristics of the Forex market help protect investors from the fluctuations of the economic crisis. If a crisis were to happen, the stock market could collapse completely, but forex trading was normal as if nothing had happened.
# 3. The opportunity to make money continuously all day on Forex
Because the market is open 24/7 for 5 days / week, you can open trades and make a profit at any time. In addition, with the time difference between countries, you can fully open transactions 24/7 without a break in any day.
Actually, on weekends the market is still open (called the free market) and you can still trade, but at this time financial institutions and central banks are not working. to a floating market and may be subject to price manipulation by some private institutions. For this reason, Forex exchanges will stop processing transactions at the end of the week to protect investors.
# 4. Forex transactions can be made anywhere
Forex trading is carried out with the help of computer software - terminals. The purchase and sale of currency can thus be made from any location in the world, just need to be able to access the Internet.
FOREX trading can be complicated for many people because they cannot buy or sell any tangible assets. You simply think that buying a certain currency is like buying shares of a country. When you buy the Japanese Yen, you are affecting the foreign exchange rate of Japan and indirectly on the Japanese Economy, because the value of the currency represents "health" now and in the future of a country.
Unlike other financial markets, Forex does not have a financial center or trading center at all. The forex market is an interbank market, and is based on the electronic trading of interconnected banks, operating 24 hours a day.
In the past decade, apart from banks and financial funds, only the "giants" were able to enter this market. At that time, in order to make a transaction of 10 to 50 million USD, Forex was born only to meet the needs of the banks and giant companies in the industry, not the traders, houses. Small transactions / investments. However, with the miraculous support of the Internet, an online trading system and exchanges were created, allowing the opening of accounts for "retail" customers. Today, marketplaces are allowed to use leverage to conduct transactions with much smaller volumes than before to meet the needs of the majority of individual customers.