What is Forex?

First step is known what we are going to talk about: Forex.

Wht i forex trading? I it similar t stock trading? Forex r Foreign Exchange

Market i th market whr th transaction f buying nd selling currencies ll
rund th world takes place. It i similar t stock market trading. Th difference i
mrl n th transacted product. Forex i n OTC market (Over th Counter).
Therefore, u r bl t trade vriu currencies vilbl rund th globe.
Forex trading i nw considered th mt liquid financial market tht operates 24
hours nonstop. CFTC (Commodity Futures Trading Commission determines th
regulation in th forex market, but th regulation i considerably th loose one. On
th thr hand, thr r l thr regulations fr retails brokers wll market
traders tht r authorized b NFA r National Futures Association.

T understand hw forex market works, first, u hv t knw th terminology

ud in th forex trading. Hr r m basic terms tht u will lw encounter
during th transaction.

1.

Cr Rate

Yu will find tht th currencies traded in forex r lw in pairs, fr xml

1.4582 EUR/USD. Yu huld rd th pairs USD $1 i equal t EUR 1.4582.
Yu n tht US dollar in thi currency pairs i nt th exchange rate bing
determined, but th EUR is. Th EUR tht serves th referred exchange rate i
knwn th r rate.
2.

PIP

PIP i th abbreviation f Percentage in Point. It i th smallest price unit in a

currency movement. PIP holds a crucial role in forex trading, bu it determines
hw muh profits u hv gotten. Thr i rtin pip measurement, fr example,
1 pip i equal to.001 fr EUR/USD currency pair. It means tht 1% increase in
EUR/USD will tk 100 pips increasing movement.
3.

Bid-Ask Spread

Th bid i th figure representing th cost price f th dealer nd th k i

representing th selling price f th dealer. Th r lw quoted in pairs nd th
difference btwn bid nd k i knwn th spread. Whn u a figure uh
as.709560-56 EUR/USD, th bid price refers to.709560 nd th k price refers
to.709556. Th market makers determine th bid-ask quotation nd th n
generate profits frm th bid-ask difference r spread.
Aftr knowing th terminology, u l hv t knw th participants in th forex
trading nd thir reasons f ding it. Hr r th participants involved in th
trading:
1. Government nd bankswhat is forex
Governments nd central banks frm countries ll rund th world will b n f
th min players in th forex market. Th r int th trading fr maintaining thir
forex reserves. Thr r tim whn government decision i related t th BOP
(balance f payment) purpose. Whn th government wnt t increase th export
volume, it i likl tht th will sell thir currency in order t increase thir
currency supply. B ding so, thr will b a currency depreciation tht leads t
exports increase. Evr decision tkn b government r central bank n
significantly influence th forex market influence bu f thir large-scale
authorities.

2. Business firms
Business firms will generally tk rt int forex trading whn th nd t d th
hedging. Th hedging i th action t lock in a rtiulr favorable currency rate in
a rtin currency pairs. Fr example, thr i a U.S based firm, whih supply wheat
t Europe countries. Th payment agreed will b in EUR. If thr i n EUR
depreciation, thi U.S based firm will nl gt fewer dollars with Euros. Therefore,
th hedging n b dn t protect th favorable rate btwn Euro nd US dollar.
Otherwise, th U.S firm based might greatly suffer frm th EUR depreciation
impact.
3. Banks nd Financial Institutions
Th thr parties involved in forex trading r banks nd financial institution. Th
minl involve in th interbank market segment in whih th profit n b
generated frm th bid-ask spread.
Evr bank h credit relations t thr bank. In th interbank market, vr
involved bank will hv it wn determined credit relation nd importance. Th
measurement f thi standard will b based n th monetary size f th involved
bank.
4. Hedge Funds

Th role f hedge funds hr n b n if thr i rtiulr party wh i tring t

predict th market direction. Th intend t gt profit frm th sales itself.
Therefore, thir min purpose i t buy lw nd sell high.
5. Retail Forex Brokers
Th days, u n find mn retail forex brokers on internet. Thrugh th retail
brokers, individuals with small capital hv th opportunity t join th forex trading
nd generate profit. People n make accounts in brokers platforms nd start forex
trading.

Mn online retail brokers hv policies t llw margin trade in whih fr example,

people with $1 account r allowed t trade u t $100. Therefore, people d nt
nd t rvid bigger account t hv bigger transaction whn uh margin trade
i allowed.
Online brokers uull rvid th traders with demo accounts tht th traders
n tr ut th offered platform first. Bid that, th broker will l rvid m
thr supportive tools t hl u in trading, uh tutorial e-book, news bulletins,
technical analysis tools, charts, automatic buying r selling signals nd m
others. Sin thr r mn online retail Forex brokers, u mut b extra careful
in determining whih n t join bu thr r mn scammers.
Lking fr a regulated broker i th min key t pay attention bfr jumping t
th online forex trading. Evn thugh u might gt a great fortune nd profit frm
online forex trading, u l nd t b careful nd lw remember tht online
forex trading i a high-risk business too. Yu n earn high profit wll lose
muh in th online forex trading. Therefore, u mut equipped urlf with
sufficient forex trading knowledge, tr t find nd select th bt retail forex broker
with n rrit platform bfr u decide t jump in th forex trading market.
Now you made your first steps in the Forex industry that is amazing, if you have any
comment or question just leave a comment below, or send me an email to
contact@bestofforex.org I will gladly answer you.
Best regards!
Alfred James
www.bestofforex.org