Also known as the currency market, Forex (FX) is the largest investment market in the world. Every day, $4 to $5 trillion in notional value is traded in this market, compared to $25 billion on the New York Stock Exchange. The importance of the Forex market was mainly due to professional traders. But with the development of currency trading platforms, retail traders enter Forex because it suits their investment goals. We invite you to discover the essentials of Forex trading.
Market Price Quotation System
The spot market and derivative market provide enhanced access to futures, options and currencies where foreign exchange is traded. For individuals, trading forex involves predicting whether the price will rise or fall on each closed position, whether they are winners or losers. In contrast, most institutional forex activity involves diversifying large portfolios. Also, to hedge against exchange rate and interest rate risks.
One of the main features of this type of market is the way prices are quoted in the foreign exchange market. The only way to quote a currency is to quote it against other currencies. Since currencies are the basis of financial system. Then we get a relative valuation measure that seems confusing at first but becomes natural after working with this bilateral agreement for a long time. Moreover, offering great flexibility to the trader, forex trading allows him to express his transactions in the currency he deems most suitable.
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How currency pairs work
The most liquid currency pairs in the forex market have the highest supply and demand. This supply and this demand are created by companies, banks, importers and exporters as well as traders. You must have heard of the most liquid currency pairs that are major currency pairs like EUR/USD. And it moves an average of 90 to 120 pips per day. This pair, of course, offers more opportunities for short-term trading. There are also AUD/NZD and USD/HKD currency pairs. They fluctuate between 50 and 60 pips and 32 pips daily. Note, however, that small and exotic coins offer many opportunities if you know a particular coin.
Various factors affect the forex market every day. Regularly scheduled data releases drive most of the ups and downs in currency pairs. That’s why traders follow the 24-hour economic calendars closely, and especially when the numbers don’t match experts’ predictions. Global shock events, political developments, a conflict, election or even a natural disaster resulting in price volatility also affect currency markets.
The secret to success in forex trading
Timeframe and market-specific variables are commonly used to differentiate trading strategies in the forex market. For example, one method is to change the market by the minute or by the day. As a beginner, it is ideal to use a forex demo account to test different forex strategies and determine relative success rates and suitability. You have the opportunity to experiment and select your preferred technical indicators for entry and exit points and finally combine elements of different strategies.
Truth be told, there is no real secret to success in Forex trading. It is important to put in the effort required to become a true trader, especially by working with patience and discipline. This is a mistake even new traders make who don’t give enough time to investments. It is also necessary to develop a winning attitude while being realistic. Your trading can be profitable when you acquire the necessary skills and knowledge and learn from your mistakes. Now that you know the basics of forex trading, all you need to do is get started in this world that is very popular with traders.