Discover the Forex currency market and learn how to trade
All about the Forex financial market, its basic concepts & characteristics you should be aware of. What income you can get, how to learn to trade.
What is Forex: Key Features and Advantages
Where you live now, is largely irrelevant to your investments. Using various analysis tools, you can predict the trend movement and get a significant return on investment. As a rule, such currencies as the US dollar, Euro, Japanese yen, British pound and Swiss franc gain the highest trading volumes. Currency purchase and sale transactions Forex are carried out in standard lots, and income is generated due to the difference in exchange rates at different times.
Why is trading on a Forex trading website profitable?
Firstly, it is a stable market, unlike, for example, the stock market, where the ups and downs are much more noticeable. Forex did not face the word crisis for decades of existence, despite all the economic turmoil. Secondly, nowadays, access to trading on the Forex market is possible for small investors who have a deposit of $10 or more. This significantly reduces the risk of the investor losing large sums of money, which is especially important for novice traders.
The Main Factors Affecting the Forex Rate
Among Forex trading participants, central banks have the greatest impact on the formation of exchange rates. The Central Bank is actually a money supplier for the country in which it operates, and, therefore, forms an offer in this market. Its decisions have a very important effect on the prices of currency pairs.
The most important players in the foreign exchange market are:
. central banks;
. hedge funds;
. other banks;
. investment funds;
. professional and individual investors.
Forex consists of four fundamental parts:
. fundamental analysis;
. psychology of trading;
. technical analysis;
. risk management.
Each of these sections is a separate section of information, which it is impossible to comprehend the science of successful trading without.
News Affecting the Market
1. Random and unexpected.
News of political and natural origin, less often an economic one. Wars and terrorist attacks have a particularly strong impact on finance markets.
2. Planned and expected.
News of an economic, less often political nature. According to the degree of importance and the strength of the market reaction, fundamental factors can be divided into three groups:
Of great importance:
. gross domestic product;
. trade deficit;
. payment deficit;
. official discount rates.
Of less importance:
. retail sales;
. housing stats;
. manufacture orders, factory orders;
. industrial production;
. consumer price index — CPI.
Of minor importance:
. futures exchange rates;
. deposit rates;
. stocks and government bond price dynamics (T-bills, T-bonds).
There are three options for market influence on the fundamental event.
The first occurs when market expectations are met. Then the price dynamics may not go under lots of changes.
In the second option, the market expectations are not justified only under the current event, i.e. the market underestimated this factor. In this case, the price can make a sharp fluctuation to reduce this underestimation and the real price.
In the third option, market expectations are not met, they are completely erroneous. Then a strong change in the opposite direction can be expected.
The Ratio of Potential Profits and Losses in the Forex Market
The most successful traders from different countries, including Nigeria, South Africa, make a profit of only 40% of all their transactions. Do not be surprised, as a result, most of the transactions concluded are unprofitable. How then do traders manage to make money if more than half of the decisions they make turn out to be wrong? The fact is that the size of the guarantee deposit is very small in futures transactions and even a slight price movement in an undesirable direction forces the trader to liquidate the position.
Succeeding in the futures market is possible only if profitable trades exceed unprofitable ones in monetary terms. This can be achieved by analyzing the ratio of possible profits and losses. When calculating the ratio of potential profit and loss, some ForexTime traders include a probabilistic factor in it. They argue that it is not enough to simply determine the rate of profit and loss, assuming that the values of potential profit and loss should be multiplied by a percentage probability coefficient. Although from the statistic point of view, this approach looks quite logical, at the same time it turns out that the trader is able not only to assess the potential profit and loss in advance but also assign them percentage values.
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