Best Way To Get Profit In Forex Market.
To find the best way to get profit in Forex Market first we have to know about the forex market. Forex market is a market where all the currencies traded. People call the forex market as Foreign Exchange, FX or currency trading.
Foreign Exchange Market is a decentralized global market where all the world’s currencies trade. The forex market is the largest, most liquid market in the world with an average daily trading volume exceeding $5 trillion.
All the worlds combine stock market doesn’t even come close to this.
The forex market is the market in which participants can buy, sell, exchange, and speculate on currencies.
Banks, commercial companies, central banks, investment management firms, hedge funds, and retail forex brokers and investors make the forex market.
Once you understand the forex market then you will be able to find the best way to get profit in the forex market.
Basics Of Forex Market
The global network of computers and brokers from around the world dominate the forex market, not by the single market exchange.
Forex brokers act may post bid and ask prices for a currency pair that differs from the most competitive bid in the market.
The forex market has two levels; the interbank market and the over-the-counter (OTC) market. The interbank market is the place where large bank trade currencies for purposes such as hedging, balance sheet adjustments, and on behalf of clients.
The OTC market is where individuals trade through online platforms and broker.
The forex market has different operating hours as compared to other markets such as equities, bonds, and commodities.
From Monday morning in Asia to Friday afternoon in New York, the forex market is a 24-hour market, meaning it does not close overnight.
The US dollar is the most traded currencies, having a part close to 85 per cent of all the trades. Second is the euro, which is part of approx 39 per cent of all the trades, and the third is the Japanese yen approx 19 per cent.
History of Foreign Exchange Market
Forex has its history from a century ago. Currencies were plugged to precious metals gold and silver. But the system didn’t work well and collapsed and it was replaced by the Bretton Woods Agreement after the second world war.
Due to this agreement, three international organizations were created to facilitate economic activity across the globe.
They were the International Monetary Fund (IMF), General Agreement on Tariffs and Trade (GATT), and the International Bank for Reconstruction and Development (IBRD).
Once the new system came in, it also replaced gold with the US dollar as plugged for international currencies.
In 1971, US president Richard Nixon announced a temporary suspension of the dollar’s convertibility into gold, the Bretton Woods system became needless.
After that, all the currencies were free to choose their own plug and their value was determined by supply and demand in the international market.
Today the forex market is the largest financial market worldwide.
Currency trading can be very volatile and the unique characteristics of Forex trading, including leverage and a market that is open 24 hours, making it very attractive for traders.
How to Get into Forex
- Forex Trading Basics: Before getting into forex you should have basic knowledge of forex trading. Like which currency you want to trade in. The quote currency is a currency which you are trading.
- Forex Account: Firstly one should have a forex account to start trading in the forex market. Opening a forex account is as similar to opening a bank account. First, you have to find out the best possible forex broker.
- You can have a specialized forex broker or the same broker people use for the share market trading. You need to fill out a questionnaire about your financial knowledge and trading intentions. Then you need to provide your ID and the minimum deposit to your Forex account institution requires.
- Starting Trading: One you activate the account, you are ready to trade, you have to keep in mind certain things; like technical analysis as to how to review charts and data.
- You should have information about the Fundamental Analysis. Looking at a company’s economic fundamentals and use it to enhance trading.
- You should also know about sentiment analysis as you try to analyze the market whether it is going down or having an upward movement.
- Determine Margin: You should determine the margin. By investing less money you can make a good profit. But it totally depends on the policies of your broker.
- Place Order: Now you are ready to place an order according to the trend of the market and your choice. And watch profit and loss.
Advantages of Forex Market
- Forex Market provides you with the flexibility to its traders. As there is no restriction of how much money you can use for trading. And there is no regulation of the markets. And as market operates 24 by 7 so it provides a flexible scenario to traders. It makes easy for traders to find the best way to get profit in the forex market.
- It also provides transparency to the traders. The forex market is huge in size and traders trade it widely but despite this, information about the forex market is easily accessible.
- The forex market provides its traders with a wide range of trading options. Traders have so many options for currency pairing. It helps to find the best way to get profit in the forex market. They also have the option to do spot trading or future agreement. The future agreement is also available in different sizes with different maturities to meet the need of the traders.
- The forex provides the most leverage as compared to the other financial asset market. The arrangement in the forex market provides traders to level their investment by as many as 20 to 30 times and trade in the market.
- Traded make money even when the movement in the forex market is small thanks to leverage.
Disadvantages of Foreign Exchange Market
Every market has its own disadvantages as well so as forex. Which are below;
- Forex Market is an international market so regulation of the forex market is difficult to issue because it pertains to the sovereignty of the currencies of many countries. This creates a scenario wherein the forex market is largely unregulated. Therefore, there is no centralized exchange that guarantees the risk-free execution of trades.
- The forex market provides maximum leverage. The word leverage automatically implies risk and a gearing ration off 20 to 30 tie implies a lot of risks. Given the fact that there is no limit to the amount of movement that could happen in the forex market in a given day. So there is a chance that you may lose money.
- Forex trading operations are difficult to manage operationally. This is because the forex market worked all the time whereas human does not. Therefore, traders have to resort algorithms to protect the value of their investment when they are away.