What is Forex Trading SA and what you need to know about the Forex market? Forex is an international financial market, founded in 1976, where currencies are exchanged. This name comes from the English foreign exchange, that is, “foreign exchange”. The Forex market is necessary for the normal functioning of the world economy and ensuring the exchange of capital between different countries. Central banks of different countries, companies conducting international business, commercial banks and various traders (speculators) participate in Forex trading SA.
The main convertible currencies are traded in Forex in relation to each other. The most popular pairs are Euro / US dollar, Japanese yen / US dollar, British pound / US dollar, US dollar / Swiss franc / South African Rand.
Each of the Forex Trading SA participants has their own goals and objectives:
- national banks intervene to stabilize their currencies;
- importers and exporters come to Forex to exchange proceeds for their national currency or, conversely, to buy foreign currency in order to pay for contracts abroad;
- commercial banks have their own business in this segment, which consists in setting currency quotes for buying and selling. The difference in the price of buying and selling is called the spread of quotes, which is their income;
- speculators use Forex as a source of solid income for those who know how to play on the difference in exchange rates, making considerable profits. And you don’t need to have a master’s degree in economics for that.
Forex Trading SA is interesting “The most famous speculator (trader) of our time is George Soros. His masterpiece in the foreign exchange market was the short-term sale of the previously accumulated reserves of the British pound sterling in September 1992. Then Soros sold currencies and shares of British companies for about 10 billion US dollars in equivalent, and after a sharp fall in Black Wednesday, he acquired them again, earning more than a billion US dollars per day. This event went down in history: it is believed that he “overturned the Bank of England.”
Forex Trading SA is…
Many people call Forex an exchange, but this is not entirely true. Unlike stock exchanges, Forex works around the clock, because the world’s banks are located in different time zones. In addition, Forex is not tied to any specific place – it is a virtual market, and you can play on it from anywhere in the world: from Moscow, New York or from the beach in Bali. The main thing is that you have access to the Internet, provided by the intermediary – the guarantor of the transaction, which will be concluded on his behalf and at his expense. Such an intermediary for small and medium clients is the prime broker with whom the contract is concluded. It is necessary to understand that a small trader will not be able to go directly to “the same Forex” simply because of lack of funds, since the standard lot size in the Forex market is 5 million US dollars.
The exchange rate is changing every minute – it is on this fact that the idea of playing on Forex is based. For example, if you buy a euro for $ 1.2, and the next day it rises in price to $ 1.3, you can sell it and make a profit of $ 0.1. Of course, in the case of using small amounts, the income is small, therefore, one can speak of tangible earnings in Forex only when at least tens of thousands of US dollars are invested.
Moreover, you can make money both on an increase and on a decrease in the exchange rate – that is, either buy cheaper and sell at a higher price, or sell the currency at a higher price and redeem it back when the price falls (the latter way of earning is very risky, has many restrictions and conditions, therefore it is strongly discouraged for novice traders).
Various factors affect exchange rates: economic indicators and policies of national banks, political changes, force majeure (for example, natural disasters, accidents at large enterprises, terrorist attacks and even weather conditions), as well as rumors, sentiments and expectations of market participants. However, despite all this, Forex is relatively stable, since a fall in one currency always entails a change in the course of another, and an experienced trader can take advantage of this with considerable benefit for his wallet.
Answers to common questions about the Forex market
Where to begin?
All you need to start playing on the Forex currency exchange is a computer with Internet access and a reliable broker. You can only get access to trading through a brokerage company. However, according to statistics, almost 90% of beginners who decide to master Forex on their own lose money and give up this occupation. Why?
There are several reasons for this, and one of the main ones is the lack of information. Often times, people start to play Forex after reading only a couple of small articles on the Internet. But in order to navigate the world of finance, this is not enough, because your counterparties will be people who know the world economy, fundamental and technical analysis at a very high level. In order to make money on Forex, you need to compete with these professionals. If you are serious about making the Forex market a source of income, invest the time and effort in your education. Today there are many companies that train and advise novice traders. Read special literature, attend seminars of specialists in trading in the international currency market – all this will give you an advantage over those who decided to play on the stock exchange without knowing all the subtleties.
How much money do you need to learn to play Forex Trading SA?
If you are a novice trader, then the correct answer is not at all. Before risking real money, it’s wiser to try your hand at opening a demo account.
A demo account is a training account, with which you can learn how to conduct operations in the Forex market, learn trading terms and start navigating the intricacies of currency speculation. It is also important to check the convenience of the proposed system for setting quotations and orders directly in the process.
You can open a demo account through a brokerage company – most of them provide this service. Usually, in order to understand the trading system in the foreign exchange market, a couple of months are enough. When you feel that you have enough practice and you can start making real money, you can open a real trading account through the same company. As a rule, the minimum deposit is $ 100, and the upper limit is limited only by your financial capabilities.
Is there a risk of losing money?
If it did not exist, then operations in the foreign exchange market would be called not a game, but work. However, most often those players who lose money are those who are too emotional and, inspired by the first success, stop taking risks and analyzing the situation. They do not rely on information and facts, but rely on some kind of abstract “luck” and belief in their own uniqueness, as a result of which they suffer losses. Studying the mechanisms of Forex work, understanding the basics of risk management helps to minimize losses, although in general even experienced traders are not insured against them. An important point is the thoughtful choice of a broker / dealer, which is impossible without obtaining prior knowledge.
Warning : the contracts or financial instruments offered for conclusion are highly risky and may lead to the loss of the deposited funds in full. Before making transactions, you should familiarize yourself with the risks with which they are associated.