If you are interested in trading, mainly foreign exchange, forex is the right thing, to begin with. You should also know the basics before you start learning more, so you can decide whether this is for you or not. We present you essential facts about the forex market, so let’s begin!
Trading is all about knowledge and information, so be sure to check out more things after this article, if you decide forex trading is something you want to go with.
The Forex market has been operating for centuries. If you are a history geek, it is interesting to know that the first recorded foreign exchange transactions are tracked back in ancient Egypt around 260 BC. Becoming digital, it now operates twenty-four hours a day with markets across the world. This gives an opportunity boost to traders worldwide, where they can maximize their chances for success. Opportunities are endless because the market never stops. It’s nice knowing you don’t have to worry about making it on time to make a trade.
2. The GBP/USD currency pair is called “cable” for a reason. Before digital communication, a large cable was connecting the London and New York stock market across the Atlantic ocean.
3. The US dollar is the most traded currency since it can be exchanged in virtually any country, and it features 80% off regular forex trades. Despite its popularity, it is not dominant in the forex market if we talk about the Stock Exchange itself. London is still number one, handling over 40 % of the Forex market since there is an overlap between the US and London trading time. Wall Street (or the US market) takes around 19 % of the market.
4. Some terms you will come across regularly;
Spot trading – this is a term for an immediate exchange of currencies, which means it is done on the spot as the name implies
PIP is often very confusing to new traders, but it can be explained: it represents the fifth decimal of a currency price (rarely fourth decimal).
Bullish and Bearish – These terms represent whether the price is going up or down and if you should buy or sell something. These terms are derived from the story about old fights between bears and bulls, where the bull would attack the bear right away (so, it means that the price will rise), while the bear was going lower, trying to defend himself (therefore it means that the price is likely to go down).
5. Foreign Exchange became almost entirely digital, although there are trading floors. It is simply more comfortable and more accessible, thanks to the internet and various digital devices. It is also very suitable since you don’t have to invest thousands of money in the beginning to trade. You can open an account with a few hundred and deal only with a dollar if you want to do something at the very beginning.
It is essential to be well informed and continually learn. Over time, you will get used to the system and get better and better. That is how you will minimize your chances of loss and increase the potential for earning. Take it slow, and dive into the forex market when you feel comfortable enough. Good luck!