The Forex market is the best market in which people can invest because it is completely decentralized and apart from that it offers investment opportunities on multiple financial instruments, although in part this also depends on the Broker that is chosen to trade since not all offer the same investment instruments, that is to say, some offer more and others less.
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Forex Definition
First of all it must be said that Forex is a foreign exchange market which operates globally through the Internet, to participate in this market for buying and selling stocks, commodities and currencies it is necessary to operate through a Broker, currently there are many and most are good in the services they offer but must choose the one that best suits our budget and investment needs.
When you want to give a more detailed definition about this market you proceed to say that the term Forex, means Foreign Exchange market, people and companies that operate in this large financial market move about 3.4 trillion dollars daily, if you want to understand more this level of money movements can be compared with the New York Stock Exchange, which moves about this same amount of money but monthly while in Forex this amount moves daily.
With this we can already get an idea of how big this market is, currently the biggest movements of money are registered by the biggest companies in the world and the richest people in the world, however this is not an impediment to make small investments of money; after all this market is open to all people worldwide so that they have the freedom to operate on a daily basis.
When a person or company operates through a Broker to make investments in this market is known as a Trader, to become a successful Trader must practice again and again to master the calculations and estimates that are made to know whether the value of a particular thing is going to increase or decrease over time.
One of the characteristics that can be highlighted of this foreign exchange market is that unlike other financial markets, it does not have a physical location, so it does not have a centralized exchange place, that is, it is an over-the-counter market, in which operations are carried out through an electronic network.
As it is not centralized, this market represents an easy and tempting way to generate income daily, due to the great monetary returns and the liquidity it represents in the world, so there is no financial market in the world that can be compared and the investment possibilities are practically infinite.
Most people at the time of investing in Forex trade with the most traded currency pairs, the most prominent is the EUR/USD, in which the base currency is the euro and the secondary is the dollar, the euro is the currency of greatest value in the world so it will always be on the left side in the currency pairs, as seen in the text above the EUR/USD would read as follows: One euro equals so many dollars. We can also find these other pairs:
GBP/USD: One pound sterling equals equis dollar amount.
USD/JPY: One dollar equals equis amount of Japanese yen.
USD/CAD: One U.S. dollar equals equis amount of Canadian dollars.
USD/NZD: One US dollar equals equis amount of Australian dollars.
If you look at the currency pairs mentioned above, you can see that the currency with the highest value will always be on the left side of the pair, in the case of the Euro this currency will always be on the left side because it is the currency with the highest value compared to the other currencies, however even though the Euro is the currency with the highest value, the American dollar is always in a more constant mobilization, because it is the most traded currency in Forex, almost 80% of all transactions involve the American dollar, even when making the sums of the percentages of purchases and sales, the most traded currency is the dollar, adding up to a total of 200% of the operations that are carried out.
In Forex you can win if the market is up or down.
When we operate in Forex we can gain if the market is to the rise or if it is to the fall, everything will depend on the strategies that are used to make the investments, for such reason it is necessary to choose the Broker that more adapts to our needs, between the most recognized we have e-Toro, Banc of Binary, ActivTrader, Plus500, Trade12, FXTM, Markets and FXCM, many others exist in different countries of the world, but those that were mentioned previously are the most used by the people at world-wide level.
Many of these Brokers offer leverage ranging from 1:10 to 1:800, for people who are just starting in these investments is recommended to choose the lower leverage, in case they do not want to trade with real money can choose to use demo accounts with which they can practice and after having mastered the financial transactions can then trade with real money.
e-Toro demo account recommendation
It is particularly recommended the use of the demo account offered by e-Toro, with these you can trade all currencies, stocks and commodities in real time and this way you can practice and then make the investments with real money. The dominion of these financial operations will come given according to the practice and the knowledge on the part of the user, everything is little by little it is not necessary to make investments of high risk if one does not have the necessary knowledge to make them.
When using a Broker to carry out financial operations it must be taken into account that we must keep as much profit as possible and minimize losses.
Technical terminologies used in Forex
Spread: This will be the difference between the buy and sell price, it can vary depending on the currency being used. We can have a Fixed or Variable Spread, this in if it will depend on the Broker that is being used to operate.
Ask Price: This will be the price at which an investor will be able to buy a currency.
Bid Price: This will be the price at which an investor will be able to sell a currency.
High: This is understood as the highest price a currency pair can reach on a given day of the week.
Low: This is understood as the lowest price a currency pair can reach on a given day of the week.
The terminologies previously exposed are the most basic that are used in Forex, there are others more but that will be left to be explained in other publications, where it is emphasized in each one of them in a more detailed and precise way so that it is understood perfectly.
Importance of the economic calendar:
Understanding the importance of economic indicators is fundamental to operate in Forex, regularly each country publishes different economic data, which serve to monitor the financial performance, economic and monetary liquidity of each of them, so you can know if the economic is expanding or if there is an economic contraction.
To have these data is of great importance at the moment of realizing a financial operation, of this way together with the calculations and the estimates that are made we can have a greater certainty of knowing if a currency increased or lost its value in a determined period of time. Naturally, investors are always moving their money from currency to currency in order to get the best return on their money according to the interest rate differential.
Using price charts complements the calculations that are made:
The graphs of prices in general terms are a sequence of prices that are illustrated in a specific period of time, these graphs can be used to analyze the currencies and to predict or to estimate future movements of the prices, when using these graphs together with the respective calculations that are made, a greater certainty can be had at the time of making an investment in Forex, with the graphs we will be able to estimate if the tendencies will be high or will be low.
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