Heard a lot about the stock market and stock market profits and want to test those waters? You may ask yourself: What is Forex? What is the minimum that enables me to enter this world? And to what extent my profits or losses?
At the outset, we point out that the stock exchange is an available or virtual electronic place where dealers meet to buy and sell trades.
In the stock exchange, financial, legal, and economic transactions occur in terms of the exchange process between the seller and the buyer and transfer ownership procedures.
There are many types of exchanges; There are commodity exchanges such as the Coffee Stock Exchange in London and the Wheat Stock Exchange in Chicago, and there are exchanges for metals, bonds, stocks, and others.
In this article, we will deal with the financial market or currency trading (Forex).
This market is the most famous and popular for those wishing to enter the stock market world due to the massive advertising campaigns on the Internet. The average daily turnover is 4 trillion dollars.
Developments in communication technology and the Internet in the twenty-first century have directly affected the nature of trading in the financial markets, which led to the conversion of financial transactions into electronic trading.
This resulted in a change in investments, with customers using computer systems to implement private buying and selling operations in securities to reach the parties’ execution in easy ways.
What is Forex?
There is no central location for Forex; instead, it is an electronic network of banks, brokers, institutions, and individual traders, with most trading, go through brokers or banks.
All of these entities have currency needs and can also speculate on the direction of the currencies.
They post their requests to buy and sell currencies on the network to interact with offers for other currencies from other parties.
The Forex market is open 24 hours a day, five days a week, excluding holidays.
Currency trading continues on holiday if at least the country / global market is open for business.
The largest and most important foreign exchange markets are located in the major global financial centers, such as London, New York, Singapore, Tokyo, Frankfurt, Hong Kong, Sydney, and Paris.
When trading in the forex market, you are buying or selling one country’s currency to another currency. But there is no actual exchange of funds from one party to the other.
This is what happens in foreign exchange places. Think of a tourist visiting Egypt’s pyramids, who may convert the physical dollar into cash in Egyptian pounds (and a commission fee may be charged to do so) to spend money while traveling.
But in the world of electronic markets, traders usually take a position in a specific currency; Hoping there is some upward movement and strength in the money they are buying or weakness if they are selling to make a profit.
One currency is always traded to another currency. If you are selling one currency, you are buying another, and if you buy one, you are selling another.
In electronic trading, a profit is made on the difference between the prices of your transactions.
Advantages of the Forex Market
What distinguishes the Forex market is that the investor can open and close deals at any time.
In less than a second, you can close or open your deal. Due to the enormous liquidity, there are always buyers and sellers at any price opposite to the stock market.
You can also trade in small amounts by opening an account and trading in any amount you want, even if it is $ 100, unlike the stock and bond markets.
It also helps provide the company with which you create an account with a tool called leverage. It is considered one of the essential features of the foreign exchange market, where you can have a small amount of purchasing power.
For example, if the leverage was 1: 100, you could trade 100 times your capital.
How are trading operations work online?
When you buy a certain amount of the currency, its price increases later, we will gain, but if the price falls, you will lose.
And when a certain quantity is sold, and the price fell, we also have a profit, but we will have a loss if the price rises.
This process takes place through an intermediary between the trader and the market. It is the company that created your account and deposited your money there.
This company gets a fixed, fixed commission for every sale or purchase made in your account.
One of the best ways to learn about Forex is to know how prices move in real-time and place some trades using a demo account, a beginner-friendly account that trades on virtual amounts.
It is like a real account in everything, except that the capital is hypothetical; Any suitable for training.
Most brokerages offer demo accounts for trading for free, and they work on the Internet or mobile in the same way as live trading accounts.
What are the best trading platforms?
The trading platforms are the essential parts of the forex trading software.
As a Forex trader, you will likely spend most of your hours at your trading platform, analyzing the market and making trading decisions, so choosing an easy-to-use and reliable trading platform is essential.
The trading platforms also offer charts for all currency pairs and various types of instruments, for financial market analysis, and direct keys for executing buying and selling.
The trading platforms also provide the ability to display prices in real-time, to allow the user to make wise trading decisions.
There are some trading platforms provided by brokerage firms, including Metatrader, Zulutrade, and Ninjatrade.
The MetaTrader platform is the most popular forex traders.
MetaTrader 4 was launched in 2005, and it is a kind of program that connects to different trading systems and allows trading in them through a computer or smartphone. In other words, the MetaTrader platform is the link between the two.
That is why forex traders often use this program to choose which broker they want to trade with, as long as it is compatible with the Forex system.
In this way, the MetaTrader platform acts as a bridge allowing you to trade with the broker of your choice within the platform itself.
MetaTrader has a simple and effective interface coupled with advanced trading tools that can significantly impact your trading performance.
Since it has capabilities for testing and simulating the market, MetaTrader 4 can also be used as a forex trading training program, which can be very beneficial for traders without much experience.
MetaTrader today has two versions: MT4 and MT5, created by MetaQuotes Software Corporation in 2005 (MetaTrader 4) and 2010 (MetaTrader 5).
What is the leverage?
Financial leverage is the use of capital borrowed from a broker when opening a deal.
Sometimes, a trader may want to apply leverage to obtain funds that exceed the minimum balance as part of their investment strategy.
Leverage is applied to multiples of the capital the trader invests, for example, 2x, 5x, or higher, and the broker lends this amount of money to the trader at a fixed rate.
Leverage can be applied to both buy and sell trades. It is vital to note that any losses will be multiplied just as they are with-profits.
Influencing factors and risks
The risks involved in trading in the Forex market are much more significant than what financial companies are trying to portray.
No one, whatever his experience, can give an accurate and specific analysis of what might happen. Given that the market is affected by several factors, we mention some of them:
– Government economic data, the most important of those issued by central banks that directly indicate the economic situation; And then it directly affects the direction of the currency moving up or down.
– Political news, which is more related to the security aspect of the countries whose currencies are traded. The occurrence of any security crackdown in decision-making places in the world has direct
– Brokerage firms’ financial leverage tool also poses a double risk because it maximizes your profit potential and risk.
Here’s an example: Let’s say you invested $ 100 in a famous currency pair: EUR / USD. With a maximum leverage of 400: 1, you could open a position equivalent to 400 times more than your original investment, and that equates to $ 40,000.
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