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Forex Trading is a decentralized global or over-the-counter market where people trade all the world currencies.
Forex Trading also referred to as Foreign Exchange or FX or Currency Trading.
The Forex market is the biggest most liquid market in the world that has an average daily trading volume which exceeds 5 trillion dollars as at 2019. Currencies are important to most people around the world whether they agree to it or not because currencies are needed to be exchanged in order to conduct foreign trades and business.
Forex is a major part of Foreign Currency and Exchange. Foreign Exchange is the process of changing one currency into another currency for a number of reasons, the most popular are for commerce, trading, or tourism.
Forex started since 1973 and has undergone a series of changes yet these changes have made it to become a big, better and accountable forum for transactions.
The Main Contributors in the Forex market are the much bigger international banks and financial institutions. Financial centers around the world act as anchors of trading between a very broad range of different types of buyers and sellers all day, with the exception of weekends. Since currencies are always traded in pairs, the Foreign Exchange or FX market does not set a currency's fixed value, they instead determine its relative value by setting the market price of one currency if paid for with another.
One unique area of this internationally traded market is that there is no central marketplace for foreign exchange. Instead, currency trading is conducted digitally, that is to say, all transactions occur through inter-connected computers between traders who are in the world, instead of having one centralized exchange.
There is now a huge retail interest in Forex Trading and some of the key reasons are explained below:
1. Round the Clock Trading: The Forex market never sleeps. It is always open all round the clock, except for the weekend and Bank holidays. This means that people can trade the market at any time that suits them, even after their regular job.
2. No Risks of Manipulation: No manipulation. The Forex market is so huge, large and liquid that you need have no fears about market twists or manipulation because it is decentralized. The volumes for trading are simply so huge that there is no trading body that is big enough to manipulate the prices in their favor. There is an exception of the central bank at certain times. For all extents and purposes, it is as close as you can get to a perfect market. In localized markets, some local large brokers can easily change the pricing by buying or selling large volumes. Foreign Exchange market which is a huge global market, stops those possibilities until or unless some very large entities like the Central Bank of a large economy interfere to keep the nation's interest in check because of the huge upside or downside or the Currency valuation. Any huge increase or decrease in the currency valuation affects the exports and import pricing respectively.
3. Anybody Can Trade: There are different types of trading accounts available that are fit for everybody. You don’t need to be very rich, or even rich to trade Forex. Accounts range from standard to mini or micro accounts that are easy on the pocket.
4. A Highly Liquid Market: The FX market has so many participants and trades such high volumes that you are always assured of your order getting filled.
5. Wide Range of Platforms: Most brokers have various platforms so you could easily pick one that suits you, use a PC or laptop, an iPad or even your mobile phone.
6. You are the Boss to Decide How Much You wish to Invest: In Forex markets you can trade with even as low as 1 dollar. Suit your trade position size. Unlike other markets where you can only trade in pre-determined volumes, you can practically customize your trading unit in the Forex market. Even when markets like stock markets do not have the constraints of lot sizes, even the price of one stock may be higher than what you wish to invest.
7. Low Trading Costs: Most times you would only have to pay the bid-ask spread, which, nowadays is pretty competitive. No other fees apply, for example, commissions for brokerage, exchange and government fees, etc.
8. Leverage Options: It is common in the Forex market for brokers to offer you leveraged trading, which means you only have to put up a small percentage of the value of your trade as a margin. This implies that with careful trading you might be able to make some very nice profits on low investment capital.
9. Freebies: Joining bonuses, demo accounts, specialized charting packages, great research, real-time news flow are some of the free stuff you get in the Forex market.
10. Accessibility: FOREX has a 24 hours 5 days access which makes it easier and better for anyone to make transactions at any time.
11. Transparent: FOREX market is a very transparent market, in other words, there is the accountability of all trades taking place.
12. Enormous Liquidity: FOREX is a very large market having enormous liquidity i.e assets that could be changed into cash.
13. Easy to Start: FOREX is easy to start with a minimum of $300 even less, making it possible for anyone to be involved.
14. Higher Leverage: FOREX provides traders with access to much higher leverage when compared to other financial markets.
The key players in the forex market are:
1. The Commercial Banks,
2. The Federal Reserves (Fed),
3. The Central Banks etc.
Some of the Terms in Forex include:
1. PIP: PIP is short form for Percentage In Point or Price Interest Point. A pip is the base unit in the price of currency pairs or 0.0001 of the quoted price.
2. Spread: The spread is the difference between a currency pair's bid and ask price. For the most popular currency pairs, the spread is often low-sometimes even lesser than a pipBefore a trade becomes profitable, the value of the currency pair must cross the spread.
3. Margin: Margin is the money in a trader's account.
4. Leverage: Leverage is the capital provided by a forex broker to bolster their client's trading volume.
5. Bulls: means market going up
6. Bears: means market going down
These are some of the factors to be considered when trading the FX market, they are:
1. Trade Deficits,
2. Industrial Production,
3. Unemployment Rates,
4. Business Inventories,
5. Durable Goods Orders,
7. Gross Domestic Product (GDP),
8. Interest Rates Nominal and Real Rate of Interest,
9. Producer Price Index (PPI),
10. Consumer Price Index (CPI),
11. Personal Income,
12. Currency Fluctuation etc.
1. To learn and understand the rudiments of Forex Trading.
2. To gain knowledge on both FX trading strategy and FX market behavior.
3. It helps to be a better fund manager.
4. It helps to create networking opportunities.
5. It offers career advancement for financial professionals.
6. It offers job opportunities in financial and investment firms.
Forex Trading - Introduction
Forex Trading - What is the FX Market
Forex Trading - Why Trade FX Market
Forex Trading - History of the FX Market
Forex Trading - Market Structure
Forex Trading - Key Players in FX Market
Forex Trading - International Overview
Forex Trading - FX Regulations
Forex Trading - Your Role in the FX Market
Forex Trading - How Can Forex be Accessed?
Forex Trading - Video Lectures
Forex Trading - Exams And Certification
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