When you want to trade currencies, we usually talk about “Forex”, which is the abbreviation for currency.
Especially due to some unfavorable factors in the stock market and the situation that has followed over the last decade, we have seen many investors turn to this market.
The “Forex” is the most important financial market in the world, with an average of 4 billion dollars traded every day. It is the currency market, the currency here is only the currency of one country. It has nothing to do with business, only with the quotation of one currency against another.
To give a simple example, when you buy the currency pair EUR/USD, you expect the euro to rise against the dollar and vice versa.
The main participants in “Forex” are mainly commercial banks, central banks and institutions, but they also include multinational companies, as well as smaller individuals. It should also be noted that the market is open 24 hours a day, even if it is impossible for individuals to trade on weekends, the market will not be closed.
Unlike stocks, you can start “Forex” operations with a lower capital base. Due to the leverage in this market, you will be able to hold larger positions than your funds.
Example: if the funds in the account are 100 Euros and our position is 400 Euros, we will use leverage 4. Some brokers offer a maximum hit of 500: 1, so you will understand that if this situation does not prevail, leverage will quickly damage your funds. Therefore, it should be used with caution!
For beginners, the constant is that, in any market, you should start with virtual accounts, then deal with real accounts, not forgetting the money management presented in the introduction.
Open a forex account
The difference with stock specific securities accounts is that you can choose between a “market maker” or “no trade” type broker. The former will play a role in the market in addition to safe positions. Therefore, the advantage is that the speed of execution of the order is fast because there is no intermediary. Sometimes you have to pay attention to the accuracy of the quote. Secondly, only market orders will be executed. The good thing about “No Dealing Desk” is the accuracy of quotes. Sometimes the order execution time is very slow.
For currencies, the requirements of fundamental analysis are not so strict. However, it is always important to understand the economic news that affects the market, so as not to be surprised.
On the other hand, in the “Forex” market, technical analysis is very important. By using the many resources you can find on the Internet, you can define your own trading strategy in no time at all. You will also find that there are many ready-made methods, but note that nothing beats your own.