WHAT IS FOREX?

WHAT IS FOREX?

The FOREX market is the largest financial market in the world. Every day, trillions of dollars are traded in different currencies around the world.

What is FOREX ForexSiendo the basis for international capital transactions, their liquidity and volume are much greater than any other financial market. It is estimated that the average volume traded by the world's largest stock exchange that is the New York Stock Exchange (NYSE) in a full month, is equal to the volume traded daily in the Forex currency market. It is also estimated that this volume will increase by 25% annually.

80% of transactions are carried out between the US dollar (USD), the euro (EUR), the yen (JPY), the pound sterling (GBP), the Swiss franc (CHF) and Australian dollars (AUD) And Canadian (CAD).

What is traded in the Forex market?

We could simply say that money. FOREX trading involves simultaneously the purchase of one currency (for example euros) and the sale of another currency (for example US dollars). These simultaneous buying and selling operations are carried out through online brokers. Operations are specified in pairs; For example the euro and the dollar (EUR / USD) or the pound sterling and the yen (GBP / JPY).

This type of transactions can be somewhat confusing at first, since you are not acquiring anything of physical form. Basically each currency is linked to the economy of its respective country and its value is a direct reflection of people's perception of that economy. For example, if you have the perception that the economy in Japan is going to weaken, the Yen is likely to depreciate relative to other currencies. That is, people are going to sell yen and will buy currencies from countries where the economy is or will be better with respect to Japan.

In general, the exchange of one currency by another reflects the condition of the health of the economy of that country with respect to the health of the economy of the other countries.

Unlike other financial markets such as the stock market, the forex market does not have a fixed location as the largest stock markets in the world. These types of markets are known as OTC (Over The Counter). Transactions are performed independently around the world, mainly via the Internet, and prices may vary from place to place.

Due to its decentralized nature, the currency market operates 24 hours a day from Monday to Friday.

Until a few years ago, this market was only available to large financial institutions and banks. Today and largely due to the advance of the Internet, it is possible for individuals to have access to this international currency market from their computer, mobile phone or tablet with minimum initial investment requirements.

Forex has become one of the most popular instruments used by individual investors or individuals looking for a career change or a way to achieve additional income.

Which currencies are traded on FOREX?

The most popular currencies with their symbols are the following:

Símbolo	País	Divisa
USD	Estados Unidos	Dólar Estadounidense
EUR	Unión Europea	Euro
JPY	Japón	Yen Japonés
GBP	Gran Bretaña	Libra Esterlina
CHF	Suiza	Franco Suizo
CAD	Canada	Dólar Canadiense
AUD	Australia	Dólar Australiano
NZD	Nueva Zelanda	Dólar Neozelandés

Why exchange currency?

There are several benefits and advantages to doing Forex trading. Here are some of the reasons why so many people choose this market:

• No commissions.

There are no commissions of any kind in Forex. Brokers are compensated for their services through the spread (the difference between the purchase price and the selling price of a currency pair).

• Without intermediaries.

In this market you do not need intermediaries, and it allows each person to operate directly from their trading platform.

• No fixed lot size.

In Forex, unlike other markets, the size of an operation or a lot, can be determined by you. This allows people to participate with accounts of very small sizes, from 100 € / $ 100 or less. (We'll explain later why an account that is too small is actually a bad idea.)

• Low Transaction Costs.

The spread or cost per transaction is generally less than 0.1 percent under normal market conditions. This can vary, and also depends on the leverage used. It will be explained in more detail later.

• Open 24 hours.

You do not have to wait for them to open the market to start trading, since you can trade from Sunday afternoons through Friday afternoons. Only for a day and a half on the weekend is it closed. This is incredibly advantageous as it allows each person to accommodate their own hours to operate.

• It can not be manipulated.

This market is so large that no participant or entity (Central Bank) can by itself control the market price for an extended period of time.

• Leverage.

In Forex, with a small money deposit you can perform much larger trades, due to the leverage being offered, even some of more than 200 to 1, which means that one perform an operation for example of $ 10,000 with only having $ 50 available in your account. However, leverage is a double-edged sword. Without proper risk management, a high degree of leverage can lead to total loss of capital.

• High Liquidity.

Given the size of this market, it is also extremely liquid. This means that under normal conditions, with a single click one can instantly buy or sell. It is the most optimal market in this sense, without many of the problems that exist in other markets such as stocks.

• Free Demo Accounts, News, Graphics and Analysis.

Most online brokers offer free demo accounts so people can practice and learn how to invest without putting their money at risk. They also offer real-time news and analysis as well as graphical tools for analyzing price trends.

• "Mini" and "Micro" operations.

Starting Forex trading does not cost a lot of money as you might think. Compared to investment in stocks, options or futures, the investment required is much lower. Forex brokers usually offer "mini" and "micro" accounts, where the minimum deposits are 100 € / $ 100 or even less. This does not mean that we are recommending to open an account of this size, only that this makes Forex more accessible to a greater number of people. We will explain later why it is a bad idea to start with an account that is too small.

How much does it cost to start trading in Forex?

A trading account today can be opened with about 100 € / $ 100 or even less depending on the online broker you choose. For micro accounts, we think it is advisable to start with at least 1000 € / $. For mini accounts, it would be advisable to count for at least about € 10,000 / $ to start.

What tools do I need to start trading in Forex?

You only need a computer with Internet access or a smartphone or tablet and with all the information you will find here in Mundo-Forex.com in our free Forex course and in the rest of sections of the web, it is really all that You need to do trading in this exciting world of forex trading.

NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.