What is the Forex market and how to make money on it
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| What is the Forex market and how to make money on it |
Learn about Forex and how to make money from it.
Forex is one of the most popular ways to earn money, but do you know when this market appeared, how it works, and why it can be profitable? It's time to learn what Forex is because basic knowledge is the foundation of your effective trading!
Dear reader, in this article, we will discuss the following elements:
- History of the Currency Market
- Features of the Forex market
- Forex trading sessions
- Participants in Forex
- How to start trading in Forex
History of the currency market:
The international currency market Forex, as it exists now, was formed relatively recently, just over 40 years ago. Until 1971, the exchange rate of global currencies was tied to the gold standard, and after its abandonment in 1976, a new principle of currency trading was introduced.
Since then, the value of national currencies has been determined not by the state but only by market relations - supply and demand. Thus, the Forex market emerged, where you can buy and sell all major world currencies at the price set directly during trading.
The name of the Forex market comes from two English words: foreign and exchange. On this universal trading platform, you can exchange dollars for euros, euros for British pounds or Japanese yen, and so on.
In a sense, the Forex market is similar to a huge exchange point, except that currency rates are set not by a bank but by the balance of buyers and sellers. The more people are willing to buy a particular currency, the higher its price rises, and when demand for a currency decreases, it becomes cheaper.
Today, the daily turnover on Forex reaches up to $7 trillion, and that is truly impressive. And most importantly, you can make a profit from it. For example, if you know that the exchange rate of the US dollar may increase shortly, you can buy US currency in advance and then sell it at a more favorable price for you.
Features of the Forex Market:
1. Versatility:
The main purpose of Forex is to facilitate currency exchange at the most favorable rates. However, central banks use this market for currency interventions to stabilize their national currency, while traders use it to make profits.
2. Trading from anywhere in the world:
Forex is not a physical exchange with a building where you need to go to execute a trade. Trading on the international currency market is done through the Internet, so it doesn't matter where the trader is located, whether it's Australia, Canada, or China.
3. Trading hours:
To make money in Forex, you don't have to wait for specific trading hours. Forex trading is conducted 24 hours a day, from Monday to Friday. This gives traders a significant advantage as they can trade in their free time.
4. Accessibility for everyone:
Trading in the currency market involves not only large banks, exchanges, and investment companies but also individual traders with small starting capital.
5. Broad opportunities:
You can make profits in Forex not only when the currency exchange rate rises but also when it falls. This is a significant advantage of the currency market compared to other ways of earning money. For example, those who invest in stocks or gold only earn income when their assets increase in price.
Forex Trading Sessions:
While stock and commodity exchanges have specific locations (such as London or New York), Forex is an over-the-counter currency market that is not tied to a specific venue. Forex trading is conducted on regional currency markets, which are connected through modern internet technologies.
According to the operating hours of exchange platforms, there are four trading sessions:
- Asian session
- European session
- American session
- Pacific session
The Asian session is the earliest, with its main financial centers being Singapore, Tokyo, and Shanghai. The most traded currency during this session is the Japanese yen.
The European session sees the highest number of market participants. The most sought-after currencies during this session are the euro, British pound, Swiss franc, Swedish krona, and Norwegian krone.
The American session is also highly active, with the Chicago and New York trading platforms operating during this time. The currencies of the United States and Canada become favorites in the market. Traders seize opportunities to make profits during this session.
Finally, the Pacific session is the latest and the most relaxed of all sessions. During the operating hours of the Sydney and Wellington exchanges, the Australian and New Zealand currencies are predominantly traded.
Trading session schedules may vary depending on daylight saving time. The times mentioned are in Moscow time (MSK).
Participants in the Forex Market:
All participants in Forex trading can be divided into four main groups:
1. Banks:
Since Forex is primarily a market for international currency exchange, the main participants are central banks and large commercial banks. They conduct the largest transactions and thus set market trends.
Private banks carry out large-scale currency exchange operations for their clients, while central banks conduct currency interventions to regulate the exchange rates of their currencies. It is this category of market participants that creates demand and supply, causing currency quotes to rise or fall.
2. Investment companies:
Funds allocate their investors' funds in securities and bonds from different countries, making currency exchange a necessity for them. Investment companies and funds are not as significant as central banks, but they still have a significant impact on the market.
3. Brokers:
Dealing centers and brokerage companies act as intermediaries between the market and traders, various financial companies, and investment funds. This group is quite numerous but has less influence on currency rates.
The main function of brokers is to provide access to the market, charging clients a certain percentage of each trade.
5. Traders:
This is the largest category of participants, with hundreds of thousands of people around the world seeking to profit from currency fluctuations. The number of traders grows every day.
Ordinary traders usually cannot influence the market situation, but they can observe price charts, analyze them using various tools (such as an economic calendar and technical indicators), predict price movements, and make profits from them.
How to Start Trading Forex:
To start trading Forex, it is necessary to register with a broker. If a trader wants to get the best quotes without company interference, it is better to choose an STP broker that routes all orders to the interbank market. This means better prices and execution. Otherwise, one may receive quotes that are favorable to the company rather than the trader and execution speed may differ.
So, here is a brief instruction on how to start trading:
- Register with a broker.
- Open an account (demo or real).
- Download the company's trading platform.
Afterward, your knowledge comes into play. Only with knowledge can you earn on financial markets. Therefore, if you are just starting your trading journey, focus on education.
In Gerchik & Co., traders gain access to educational materials immediately after registration. Webinars by the company's analysts, including Alexander Gerchik, help to start making profitable trades quickly.
How to Transition from Demo to Live Account Quickly and Correctly
Everything comes with experience, and to gain experience, you must take the first step. Don't be afraid to start because all great traders were once beginners too!
To ensure that Forex brings real profits, watch a short video from a successful person, the president of Gerchik & Co, Alexander Mikhailovich Gerchik. Just like everyone else, he was once a beginner and entered the market with a very small capital, but he was able to achieve a lot because he believed in himself and Forex.