Tuesday, May 23, 2017

Why is Forex a market of the Future (Guest Post)

What forex shortage stands for? For Foreign Exchange, you may know this type of trading also under following names: Forex Trading, Currency Trading, Foreign Exchange Market, or shortly FX. This market is just about buying one currency and selling another currency. So the general task is to buy cheap and sell expensive. FX market is open 24 hours a day, 5 days a week - only weekends are off. Main financial centres of FX are London, New York, Tokyo and Hong Kong.

How to trade Forex

Trading forex means trading currency pairs. You as a trader, for example, buy euros with dollars and you expect that the value of dollars will go down in comparison to euro. If your prediction is correct you earn money by reverse sale. The principle of currency trading is very easy to understand, however trading itself not so much, therefore you need to apply forex strategies and money management strategies that will help you get the edge of profitable trading.

Most traded currencies

If a certain currency is traded more often than others you can usually trade it with more tight spread (thanks to a huge liquidity). The most traded currencies are USD, EUR, JPY, and GBP. The most liquid currency pair is EUR/USD. In almost 87% of all trades, we can meet with the American dollar. No wonder when the almighty dollar dominates in the world's largest economy, the United Stated of America.

Interesting facts about Forex trading

Did you know that forex is...
  • Is considered to be one of the finest markets in the true sense of the word (market economy principles).
  • Is accessible with just the internet connection, no installing is required.
  • Is a market with no commission policy. That means you do not pay a fee for creating a trade (broker makes money only on a spread).
  • Is highly liquid, there are 5,3 trillions of dollars traded daily
  • Is only about you. You do not need any employees, you have no overhead costs (besides from your computer). Forex trading is one of the freest business.
  • Is tradeable from anywhere in the world as long as you have internet access.
  • Is easy to understand, the principle is quite simple.
  • Is a market of the future. Already nowadays forex is the biggest and most popular financial market in the world. More and more people use its advantages.
  • Is market with unlimited possibilities. There are no limits to your profits. Most brokers offer margin-based trading, therefore you can earn a lot of money even when your capital is not sufficient yet.
  • Is almost for everyone you can start even with low capital, or you can trade on a practise demo account.

Forex trading in practice

When we trade forex we should focus on several things. For start, we definitely shouldn't overlook forex news and announcements, because they are very important when it comes to making a decision whether the price of one pair will go up or down. There are several websites which will provide you with this kind of information, one of them is definitely marketwatch.com. You will find there some trading ideas and tips which you can use when you trade. You should also keep an eye on the economic calendar which will provide you following information: an event which is planned on a certain date, an actual current price of the currency, a forecast of the price (and how the event will most likely affect it) and some others.

The forecast is usually marked with labels that indicate how important the news will most likely be - low (low impact on the market), medium (medium impact) and high (high impact). I definitely do not recommend trading news that are marked as "low" without using any other technical analysis, because they are not very solid. If you want to trade based only on a fundamental analysis, look for medium and high importance tags. You also might firstly consider having a look at the previous announcements to see how they affected the price of the currency. Because sometimes not even news with high importance are able to break the price to the opposite direction. The best way to learn how to trade the news is an extensive practice. For this purpose, you can take advantage of a free practise account for forex trading.

BIO: contribution from
Michael is a devoted economist who firstly recognized the forex market 5 years ago. He is also known as a financial nerd. He loves making analysis and reports to see how far he moved in trading over the years, he also loves writing and sharing his beliefs with the internet.


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