Wikipedia “The foreign exchange market – (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all aspects of buying, selling and exchanging currencies at current or determined prices. In terms of trading volume, it is by far the largest market in the world, followed by the credit market.”
What is Forex?
FOREX is the largest market in the world, also known as the currency market, has no physical location, all forex transactions take place over the Internet. It is available worldwide to all traders, regardless of the country of residence, open around the clock from Monday to Friday. The trading session lasts 8 hours, and each trading day consists of three trading sessions. Exact session hours by universal time (GMT): Asia from 00:00 to 08:00 GMT, London from 8.00 to 16.00 GMT, North America from 16.00 to 24.00 GMT. The biggest advantage of the Forex market is its liquidity, thanks to which the sale and purchase of any currency is not a problem, regardless of the amount and time of day. The only exception may be transactions for too low amounts that are not accepted by some brokers, however, many forex brokers allow you to trade even very small amounts. Investors in the Forex market use currency fluctuations for speculation, thanks to this method they have the opportunity to earn regardless of whether the exchange rate is currently falling or rising.
The average turnover on the forex market is over $ 2 trillion. This is about ten times higher turnover than that achieved in all other markets around the world. It is worth noting that more than 90% of transactions are speculations, the earnings or loss of the investor depend on a successful forecast of an increase or decrease in the value of currencies. Currency price fluctuations are influenced by various factors. With the right knowledge, you can more accurately predict moments of price increases and decreases for a particular currency, the main factors determining price fluctuations are:
- General situation in the country
- Level of economic development
- Foreign capital investments
- GDP (gross domestic product)
Each currency must have a counterweight that determines its value, which is why currency pairs have been created. An investment on the Forex market consists in a favorable exchange of one currency for another, purchase when its value decreases, and sale when it reaches an upward trend and its value exceeds the purchase cost. The price difference between buying and selling is a profit for the investor. The most commonly exchanged currencies are US dollar, euro, yen and pound. The most popular currency pairs in Europe are ERO/USD, USC/CHF, EUR/CHF, USD/GBP, EUR/GBP. These are the most stable currency pairs at which the risk of losing a large part of capital is negligible.
Before you invest on the Forex market, you must remember that each session has a different trading volume, for example a session in London reaches about 50% of the total daily trading volume, the remaining 50% falls on two subsequent sessions, hence the simple conclusion that the most money flows during sessions in London and it is during this period that the greatest demand and the largest number of active investors are achieved. This directly translates into easier earning opportunities, which is why the London session is the most recommended session for beginner investors. During the American session, investors trade mainly in the same currency pairs as during the London session, but the American session achieves a much smaller daily volume (about 25%). During the Asian session, the largest volume is recorded on regional currency pairs, e.g. USD/JPY, USD/AUD and EUR/JPY.
The FOREX market provides a chance to earn large amounts of money quickly, but involves some risk of losing invested capital. Knowledge and experience in investing in currency pairs significantly reduce the number of wrong decisions. Investing in the forex market provides a higher rate of potential return on successful investments than all other assets, such as company shares, large companies or commodities (oil, gold, silver). An additional advantage of investing in the Forex market is the opportunity to use the financial leverage offered by brokers, which significantly increases the trader’s potential profits if a profitable investment is made. However, using the leverage system carries the additional risk of losing invested capital faster, so before you use leverage in your investments, read the article on our website to better understand how leverage works.