Before you begin trading the forex market, let's take a quick look at how it works.
The foreign exchange market, otherwise known as ‘Forex’, is a marketplace whereby foreign currencies are bought and sold. Recently however, many forex brokers have evolved into providers of stocks, commodities, index trading as well as other contracts for differences (CFDs).
The current state of the forex market can be traced back to a 1944 conference called the ‘Bretton Woods Agreement’. In that conference, the IMF was established, the World Bank was created and a decision regarding the stabilization of currency exchange rates was made. This solution was called the ‘Bretton Woods System’, named after the meeting’s location in New Hampshire. In this system, all currency exchanges were stabilized using a gold standard. The US dollar was recognized as the main currency used for payments between the participating countries or, as it’s commonly referred to: the world’s ‘reserve currency’. Today, forex trading volume reaches roughly $4 trillion dollars per day. And whether we are aware of it or not, we all directly or indirectly participate in the forex market. That’s because anytime we make transactions on foreign goods or services, the currency we use to purchase them with will eventually be traded on a foreign currency at some stage.
MAJOR PARTICIPANTS OF FOREX TRADING
Central Banks are the largest and most influential participants in the cross-border currency exchange. Their decisions have a major impact on the forex market . Some of the most influential central banks include the US Federal Reserve, the European Central Bank, Bank of England, Bank of Japan, Reserve Bank of Australia, Reserve Bank of New Zealand and the People's Bank of China.
Their decisions often result in the tightening or loosening of their jurisdiction’s fiat currency. These rulings often determine the value of their local currency overseas.
Although they are less influential actors in the forex market, ’market makers’ help reduce liquidity risk while facilitating the pace at which traders can enter and exit the markets. Market makers will profit by buying low and selling high while hedging risk by charging commissions and fees.
Commercial banks are the main buyers and sellers of currency. They execute foreign transactions on their own volition or at the request of investors. The scope of commercial bank transactions comprises of roughly 30% of the forex market.
Large investments firms
Large investment firms manage their client’s capital. These outlets are primarily comprised of financial experts and economists who possess the knowledge and expertise needed to manage their investor’s money. In aggregate, these investment funds comprise of approximately 10% of the forex market.
Although their influence is limited, brokerages are the most active participants. In general, there are two types of brokers. The first kind operates within the framework of trades executed on certain stock exchanges. These include (but are not limited to) the CME, FTSE, and the NYSE,
The second type is an off-exchange broker or ‘over the counter (OTC) brokers’. They operate 24 hours 5 days a week. Off-exchange brokers provide traders with virtually every financial instrument available on the various exchange platforms. One example of an OTC broker is Trade24. OTC brokers ensure that the transaction volume of the broker does not exceed 10% of the total amount.
- Private traders are the most dynamic forex traders. They are also the least influential. Their results will depend on their decisions made by the remaining players in the market. This has given them a great deal of maneuverability when trading. That’s because private traders independently make decisions to buy or sell currencies without having to depend on the decisions of others. Opening an account with Trade 24 is your opportunity to join them.
In its present form, forex trading has enabled investors to gain easy access to the online exchange. To get started, all that needs to be done is to open a trading account. A proposed trading platforms can be installed or a virtual version can be used as well.
Before you start trading, it is advised to learn and familiarize yourself with the basic concepts of forex trading.
THE MAIN TASK OF THE TRADER ON THE FOREX MARKET:
The main goal of a forex trader is to understand market conditions while rendering its information in an attempt to make profit.
The problem with many novice forex traders is that they are overeager. They will often increase their deposits several times over, throwing everything they learned out the window in an attempt to collect instant returns. They will often ‘trade from the gut’ abandoning their strategy instead of letting the markets come to them. Forex trading requires discipline and those who disregard this important principle will more often than not set themselves up for heartache.
To learn how to predict market conditions and develop a sound forex trading strategy that will set you up for success, it is advised to take a comprehensive course on forex trading. One such course is offered by the Trade 24 online forex brokerage.
The foundation of successful forex trading is the ability of the investor to properly analyze market conditions.
Methods of Forecasting on the Forex Market:
Technical analysis is a method of dissecting price movements using various financial tools. This strategy consists of predicting market conditions by analyzing price fluctuations and isolating financial trends.
Traders engaged in fundamental analysis will often take into account economic, political and other external factors that affect market conditions when trading.
Traders who have completed a course in forex trading are better equipped to forecast market conditions and profit.
Some forex course graduates go off to launch their own investment firms while others optimize returns by using various online trading platforms such as Social Trading. Social trading is an interactive service provided by Trade24. With Social Trading, forex traders can share information and insight on an interactive online network.
Forex trading offers an excellent opportunity for anyone looking to obtain financial freedom.
- Now is your chance to open an online forex trading account and be well on your way to becoming a successful investor!