What is Forex?

//What is Forex?
What is Forex? 2017-06-25T15:03:29+00:00
Forex or FX market is abbreviation of two English words – Foreign and Exchange. The volume of trading in the Forex currency market is 5.5 billion dollars and it is the most liquid and most transparent market in the world.
The Forex market is not confined to one location as is the case with the New York and Belgrade Stock Exchanges. Forex market is an unregulated, Over The Counter (OTC) or interbank market. On the interbank market, participant’s accounts are linked through a network, ie. connected with each other.
Although it is known as the currency exchange, apart from currency pairs it is possible to trade oil, gold, silver and other precious metals, stock indexes and many other financial instruments on the Forex market. Trade takes place via trading platform, while the intermediary is the company whose platform You use.
The forex market is the world’s largest financial market in terms of trading volume. Daily trading volume is 5.5 trillion dollars, while the largest stock market shares trader, NYSE, has a daily volume of $ 20 billion.
    • It is possible to conduct large transactions with a small stake. You can invest in several markets at the same time.
    • You can limit the loss and profit with setting Stop Loss and Limit Profit functions for Your orders.
    • Other markets are limited by working hours, while the Forex market is not. You can trade 24 hours, 5 days a week.
    • On other markets, You earn mainly when the prices rise. On the Forex market can earn and when rates and prices are falling.
    • Markets with a small number of traders and low trading volumes are easily manipulated. Forex market can not be manipulated due to the large number of investors around the world, unlimited geographic area from Japan and Asia to Europe and America, and the large trading volume.
    • Forex market is the most liquid market in the world.
There are fundamental components necessary for success and almost all experts agree on this: You must have a good knowledge of technical and fundamental analysis, as well as management of Your account. You should know the psychological aspect of trading and be disciplined.
Because of very high daily trading volume, manipulation of Forex market is impossible.
You can monitor market via real time trading platform that your intermediary company offers you.

The advantage of Forex markets is that you can trade 24 hours, 5 days a week. Trading begins on Sunday an hour before midnight, local time, when the market opens in New Zealand, followed by Australia, Tokyo, Hong Kong, Singapore and Dubai. Before these markets close the European markets open; and before the European markets close, the US market opens from 14:30 to 22:00. Then the New Zealand market opens and so on.

The information from the United States market has the most impact on others. That is why the highest number of participants on the market is during its working hours. Because of this, the opening of the US markets at 14:30 sees the greatest activity during the day.

FOREX CENTERSCOUNTRYOPENING HOURSCLOSING HOURS
SydneyAustralia23:0007:00
TokyoJapan01:0009:00
FrankfurtGermany08:0016:00
LondonGreat Britain09:0017:00
New YorkUSA14:3022:30
The main participants on the forex market are banks and brokerage houses. Individual or institutional players participate through intermediaries. Brokerage houses meet the needs of smaller investors while larger investors to hold deposits in banks.
These are the codes and abbreviations for the most traded currencies.
SIGNCOUNRTYNAMESHORT
USDUSADollarBUCK
EUREUEuroFIBER
JPYJapanYenJEN
GBPGreat BritainPoundKABAL
CHFSwissFrankSWISSY
CADCanadaCanadian dollarLOONIE
AUDAustraliaAustralian dollarAUSSIE
NZDNew ZealandNew Zealand dollarKIWI
The exchange rate is the price of a currency pair. The first currency listed in the pair is called the “base currency” and the other “counter currency”. With the currency pair EUR / USD the base currency is EUR, and the counter currency is USD.
They are always two numbers given after the currency pair, the first always has a smaller numerical value than the another. This can be illustrated by an example (EUR / USD – 1.2660 / 1.2663). The first number is known as the “bid price” or “sell” and the second number is known as “required”, “or” buy “. Number for “offer” (sell) is the primary price at which You can sell the base currency and “requested” (buy) is secondary. In this case, it is the price at which you can buy EUR and sell the USD.
The investor will not sell or buy a currency at full market value. The value of currency is given for two prices: sales (bidding) and purchasing (required). This difference between the two prices is called the spread. In other words, the spread is the profit, ie. the difference between buying and selling prices.
Lot is a unit of trading in the Forex market. The standard size is 100,000 US dollars. Many brokerages are using the minilot ($ 10,000) as a basic unit, and even mikrolot ($ 1,000).
PIP is an acronym for the English expression “percentage in point”. Percentage In Point (PIP) is the smallest unit of exchange rate changes.
Leverage is a mechanism that allows for transactions on the market bigger than your stake. Currency pairs are generally fluctuating more or less than stocks or the futures, so the leverage is very important for successful investment on the Forex market. The high degree of leverage is possible in the trading on market and it can work in Your favour, but also against You. Leverage can lead to large losses as well as a large gain.
Market makers or dealers are banks, specialized in the business, which provide the selling and buying rates. Market makers do not establish a personal relationship with clients and their business is not portfolio management or mediation. Clients themselves are bound to perform transactions. Market makers are trying to provide a balance between supply and demand on the market and keep the trading book.