What is Forex?
In general we can tell you that FOREX, whose term comes from Foreign Exchange which in Spanish means «currency exchange», is neither more nor less than the largest market in the world and with the highest liquidity, reaching daily trading volumes that exceed the 3 trillion dollars.
So much so that the New York Stock Exchange, which is the largest in the world, needs around 30 days to handle that amount.
Now, going into details, unlike the New York Stock Exchange or other markets, Forex does not have a physical place, it works through virtual procedures that run from anywhere in the world for 5 days a week without interruption 24 hours, only closed on weekends. These virtual procedures or transactions are no more than banks, companies or even people in this case the traders, buying money paying with money, do you get confused ?, Well read on and explain.
How does Forex work?
Almost all countries have their own currency, so there are dozens of currencies in circulation, for example, the United States has the dollars, Mexico has the Mexican pesos, the countries of the European Union such as Spain, Italy, France, etc … the euro and so on with the other countries. Each type of currency has a certain value.
Let’s take a practical example, imagine that you go on vacation to Italy, but in your country the currency or main currency is the dollar or USD, and you have 2000 USD to spend on the trip, then, once you arrive at your destination, to be able to buy or pay for services in that country you need euros (EUR), so you must go to a currency exchange and buy those euros you need with your dollars, but having different value if for example the euro is currently trading at 1.25 only 2000 / 1.25 would be 1600 euros.
Well, Forex is like that house of change but globally, where banks, companies, etc …, need money or foreign currency from other countries for their negotiations, and because of this arise those transactions or virtual procedures that you I spoke before.
That is why when we work with Forex the currencies will always appear in pairs, the best known are the Euro-Dollar or EUR / USD pair, the pair Libra-Dollar or GBR / USD, and the Dollar-Yen or USDYJP pair, taking into account each of them a different exchange price.
The exchange values of each currency are defined depending on supply and demand, that is, if a currency has more demand than supply, the price of the same will rise, and if not, if the supply is greater than the demand, the price will go down As there is a constant variation between supply and demand values, constant fluctuations in the price of currencies are generated.
How do you earn money in Forex?
We traders use these fluctuations to generate profits or income, because if our analysis tells us that the price of a certain currency pair as for example the EURUSD will go up then buy and then sell it more expensive and get the profits for that difference, and if our analysis tells us that the price will go down then we sell and then buy cheaper and thus take the profits, so in this market you can take advantage of both the ups and downs of price.
Here I want to emphasize that unlike real life, you do not need for example to sell or buy euros, you only need a capital in the trading account to enter and exit the market, look at it this way, you have $ 1000 in your trading account and you think that the price of the euro will go down, because you enter the market with a sales position, the size you can afford, for example, 100 dollars, where on the other side of the world there will be another person buying that same amount, and if the price goes in your favor, in this case down, you would be earning the money that the other person will be losing, because in that case the market was against you, and once you think that the price will start to rise again, you exit the market taking the profits, as simple as that.
This is a profession, not a casino !!!
I want to make it very clear, trading is not a game of chance, and guess in what direction the market will move is very complicated, so you need a lot of patience, dedication and commitment, but above all things a lot of training and practice. Enter the financial markets including Forex, without having a good training that includes mastery of concepts, techniques, and consistent practice of a particular strategy, will cause you to lose your money in a short time and disappointment of trading, and is not the objective, because to tell the truth, in my opinion, is the best job in the world.
To give you an idea, rule 90, 90, 90, says that 90% of traders lose more than 90% of their account in less than 90 days, an interesting figure, yes, but everything is not lost, if you form and train correctly you can achieve that 10% who earn a lot of money in the currency markets or financial markets. But the good news is that in this blog we will teach you to be part of this 10% totally FREE.
However, if you do not have enough time to devote to this activity or your training and you have some capital to invest, there are also many sign providers, basically people with many years of experience, professionals who give you the tools and the possibility of doing operations in a professional manner without having much knowledge of the market, opening and closing operations when they tell you and in the way they tell you, giving you a certain degree of profitability, yes, no experiments or contributions, you simply do things exactly as they say, because if it can not cause the loss of all your money in a very short time.
I also want to tell you to be very careful when choosing this type of services, because many of them may not be as profitable as they promise, because they do not have proven results over long periods of time.
What to do to start investing in the FOREX market?
With the advancement of technology today it is very easy and inexpensive to start investing in the Forex market, see the simple steps you must follow to start as quickly as possible.
1- The first thing you must do is decide how much money you want to allocate to start investing, always remember that it must be an amount that you can afford to lose, because it is very likely that at the beginning, you lose that amount even several times. And it’s not the end of the world, it’s a normal process when you start and you’re a beginner, I for example burned several accounts before I could live on this.
2 – Search and hire the services of a good broker for Forex, with reasonable leverage, and favorable trading conditions for this type of market. But do not be alarmed that today there are many brokers who do not charge for their services, they only earn for your operations.
3- As the third and last obligatory step, we have the training, that is, dedicate time to study and practice both the technique and psychology, otherwise you would be betting like in a casino, and not investing as you should.