What is Forex?
The word Forex is an abbreviation of the Forex Exchange Market. This is the most liquid market in the world where you can trade or exchange of one currency to another. For example, if you think that increases the value of the euro and you have dollars, you can trade in million U.S. dollars. If you are right and the euro appreciates against the dollar, so you can close the stock returns.
The basic idea of Spot Forex Market. This is an interbank payment system, which means that it is not centralized. There is no central exchange where currencies are exchanged. This is a global market. You can trade Forex online 24 hours a day, 6 days a week.
These markets are born in the 70's for ten years. The reason was that if the currency is not backed by gold anymore. They began to float freely. Their value depends on the forces of supply and demand due to economic factors, speculation, etc. This has resulted in the Forex market.
You know how to trade forex on the Internet, as I said above. There are many brokers as www.oanda.com that allow you to open an account with only $ 300 to $ 500 and start trading online. You can also get a demo account first and only trade with play money, to test the waters and see if you think this market or not.Demo accounts are free with most brokers. Some brokers offer demo accounts that expire in 30 days, while others never expire. It is important for trade in the paper, because they can test their strategies and see if they work or not.
Forex is risky, but can be very profitable as well. You are able to negotiate between 20: 1 to 400: leverage. This means the broker will pay more money than you have in the trade balance.
For example, say that the broker you can buy at 100: 1 leverage. If you use all the levers for each dollar you have on the account you are able to act 100th Say you have $ 1000. With $ 1000 on the 100: 1 you are able to trade $ 100,000 dollars in exchange for other currencies. You multiply your potential commercial lot. This allows you to make more profits but you also take more risks.
Let me show you an example. Say you have 100 to 1 leverage on the account and you act capitalize fully with $ 1,000. EUR / USD pair (Euro / Dollar) is trading at 1.2500. So you enter a position of the pair.Say you are long. If the market moves in your favor by only one percent (1.2600), you will double your money and you end up with $ 2,000 in the account. If the market moves against you by one percent (1.2400), you lose all the money you have in your account or the greater part, as the broker you're dealing with.
This can happen very quickly. The market can move in as many minutes or hours. This is what makes Forex very lucrative but highly volatile. I do not know whether novice traders to understand the extent of what I say here. Many people come in forex trading only see half of the truth. They slip into this market by all the hype around him fly.I do not think any market around the world the opportunity to make money in this market is not. On the other hand, there are some risks. It's important that new players before the commercial paper without compromising the real capital. We have learned to do. I did not learn many basic concepts of this market until I started to make a demo account. Now, let me explain the other important issues. Spot Forex Market is traded currency pairs. Every time you move your position to trade one currency for another. For example, if you buy EUR / USD you are buying euro and selling the dollar. If you sell EUR / USD sell euros and buy dollars.
When you enter a position, can not be exchanged for other currencies, unless you have other assets in your account, but you can trade in multiple currencies at the same time, as long as you have enough space / trade money. If you never trade in Forex before you can see how this works, when you practice on a demo account.Another thing you want to know is that Forex is quoted in pips. Your profit on each transaction depends on many aspects. One of these aspects are nuclei. Another is how much influence that you use to trade. A pip is the smallest unit, the price of a currency pair can move.
For example in the case of the EUR / USD one pip is equal to 0.0001. If the price is 1.2500 and it moves to 1.2501, it offers a pip. If she moves from 1.2500 to 1.2600 it moves 100 pips, as in the example above.Now, how much you earn for each operation depends on the number of pips you make and how much money you have invested in this trade. Also, what is the influence of this account. If trade with the lever complete with 100, has a commercial leverage and $ 1,000, if the market moves 50 pips in your favor, then you win $ 500. This can occur within minutes after entering your order.
Most experienced traders would not advise you to trade in that way though. The reason is that if the market moves against you, then you could lose everything in a matter of minutes. It is better to have fewer performance targets for all exchanges simple and compound your profits over time.principles of money management is that it is better to risk no more than 1% - 3% of its capital, especially if you are an inexperienced operator. It's something that I have explained in another section of this series.
Well, we hope this information has been useful to you. It was an introduction to the Forex market.
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