What is foreign Exchange (FOREX)
What is foreign Exchange (FOREX)
The foreign exchange market, also known as FOREX or FX, is a global currency trading market. With more than $ 5.3 trillion in daily trading volume, it is the largest and most exciting market in the world. Forex trading is simple. Whether you exchange 100 Euros for U.S. dollars at the airport or 100 million U.S. dollars for Japanese yen between different banks, these are actually foreign exchange transactions. The range of traders involved in the foreign exchange market is very wide, from managing billions of huge financial institutions to individuals trading hundreds of dollars.
The trading volume, kinetic energy, and opportunities that exist in the foreign exchange market are huge. Some people think that it is closest to the perfect market: all traders from individuals to big banks trade under the same terms and requirements, get the same information, and the market provides unlimited liquidity, you can continue to buy and sell No threshold restrictions.
Enter online forex trading
Thanks to the advent of the Internet, you can trade on the foreign exchange market in the same way as traders from the largest banks and investment funds.
All you need is a computer with an internet connection and a trading account opened with a forex broker to get involved in trading.
How Forex Trading Works
One currency will be exchanged for another in the foreign exchange market. The most important aspect in the foreign exchange market is the exchange rate between two currencies (currency pairs). You may have seen it in the news like before:
| Currency pair | Exchange rate |
| EUR/USD | 1.4515 |
| GBP/USD | 1.6430 |
Foreign exchange rates change rapidly, sometimes within a second, many operations are performed 24 hours a day, 5 days a week. The European economy is better than the United States, rising relative to the US dollar relative to the euro (EUR / USD ↑), and vice versa.
How do you make money in the forex market?
If you decide to buy 1,000 Euros in USD. The exchange rate EUR / USD at the moment of your purchase was 1.4500, so you need to pay $ 1450.
Then, you are ready to sell the EUR / USD exchange price at 1.5500. At this point you sell your 1,000 Euros and get 1550 USD. You started with $ 1450 and you now have $ 1550, so you make a profit of $ 100.
Alternatively, you can sell the euro to buy the dollar at an exchange rate of 1.3500. You can sell for 1,000 Euros and get 1350 USD. The original price was $ 1,450 and the current price was $ 1,350. In this case, $ 100 was reduced.
This example illustrates how to make or lose money in the foreign exchange market.
Seven habits of successful traders
Seven events that traders cannot forget
1. Prepare the trading plan in advance and follow-up-successful traders will always prepare the entry and launch points of the transaction. This protects you from making impulse decisions without considering all factors.
2. Write a Diary-Write down when and how you traded so you can review your decisions.
3. Track related news and ignore factors of distraction-In the era of 7×24 global diversified news, things always happen. At least that’s what news channels and journalists want you to believe. Filter out noise and focus only on events that affect the positions you use
4. Don’t trade after huge losses-everyone’s position will cause huge loss. In any case, good traders know that what they should avoid is actually the angry and frustrated result of this position trading. It’s even time to make more serious mistakes. It’s best to step back and calm down.
5. Learn from consistent winners-always have reasonable and structured knowledge about markets and trading. The risk is someone who introduces you-why do they share a system that prevents danger? The fact is that anyone can make a profit in the market, but rarely can they sustain long-term trading profits. We should all learn from them.
6. Commit to making effective decisions-When you find effective decisions, you can stick to them instead of constantly looking for “the next big thing.” Many successful traders use only one or two techniques and no other techniques. Changing the style blurs the photo and can’t focus on the decision that works best for you.
7. Keep your heart and brain healthy-The market is a despicable competition, not just a brain challenge. A good trader knows that you need good health, which can affect your decision-making, concentration and trading patience. Staying up late trading will only lead to fatigue and more errors.
Do you agree with one of us? Let us know what other habits you bring to success.
What is fundamental analysis
We will study the most common analytical methods and provide instructions for trading based on fundamental analysis. There are two analytical methods (fundamental analysis and technical analysis) for foreign exchange, commodity, stock, and index trading. Fundamental analysis observes the driving forces for buying and selling money, commodities, and stocks in the real world. This large-scale force is constantly observed by the government, corporate leaders, investors, and traders. One thing to pay attention to early is that although all financial instruments affect each other, there are only specific factors that promote a traded product.
This is why foreign exchange traders pay close attention to the strongest central bank interest rates, the European Central Bank and the Federal Reserve. Stocks and indexes are also affected by this. We can give a typical example of Apple’s new product release / revenue report. These activities are not just attracting the attention of clients, but even being attracted by investors and traders.
Stock traders wait every three months for a quarterly earnings report. Since then, the company has released earnings records, operating income, earnings, etc. They provide a point of reference for everyone and ensure that everyone is on the equal footing. Data release These data combine tandem, industry development, rumors and news all affect stock prices. After that is the time of maximum turbulence, especially the information has not been digested by the market.
Traders delve into this data. They often pay attention to other statistical information for future price trend analysis, but the above factors are the most important factors for fundamental analysis. In any case, there are traders who think technical analysis is more reliable, because technology includes emotional judgment. In our next blog post, we will explore how to request the integration of these two technical analysis methods!
Introduction to Technical Analysis
Technical analysis is a method of trading without involving the past performance of the market. Technical analysis refers to understanding the future development trend of the market on the basis of past market conditions. , Volatility, etc. This analysis method is more scientific and fair. Not to mention, most transactions are currently programmatic.
This analysis is based on market forecasts. The main thing is that what happened before will repeat itself. This means that prices will reach previous levels again, or the market will replicate similar patterns or trends. The so-called foundation is a predictable thing, so many indicators for predicting price movements are often developed. Among the most popular are Relative Strength Index, Moving Average, Fibonacci Number, Oscillator (please note there are more). Some focus on price changes, some focus on conditions that make goods overbought or oversold, and some focus on other factors. The advantage of these indicators is that they are compiled numerically. If read correctly, these indicators can determine entry and exit points. Then traders do not have to watch the news, opinions and forecasts-they only need to observe indicators that reflect the actual situation of the market. This makes it easier to identify trends (especially in the trading ranges created by candlesticks, support and extension lines). Their main reason is that the world, economy, business, life, etc. are changing with each passing day. Most people and businesses exist within a certain range, but occasionally some businesses break past previous limits. Therefore, we still need human negotiation. We must combine technical analysis with fundamental analysis so that we can have a comprehensive understanding of currencies, companies, and countries.
In general, fundamental analysis is used to identify earlier trends. Technical analysis is generally used in short-term trading. With that in mind, most traders follow the news daily and then make more reliable decisions after performing a technical analysis. In this way, traders maintain a balance of their bargaining power and quantified indices.
Spread
If you check forex quotes on the trading platform, you will see that there are 2 prices for each currency pair. One price is the price at which you can buy, which is the “ask price” (also known as the price, the asking price), and the other price is the price at which you can sell, which is the “bid price” (also called the expected price, the bid). The difference between these two prices is the spread. The asking price is always higher than the bid price.
Advantages of leverage
If your Forex broker provides you with a leverage of 1: 100, you can trade with 100 times the amount of funds you have deposited. This means that if you want to buy 100 000 EUR / USD, you only need to have 1,000 Euros. When making this transaction, you can get the rest of your funds as a loan from your broker. Through the leverage ratio, you can open a position with a value of 100 times, so the profit and loss is also enlarged by 100 times. Need to be quite cautious.
Make your first foreign exchange transaction
To start trading, get a free demo account and log in. Then select a currency pair (such as EUR / USD), after selecting the quantity, click the “Buy” button, and you have become one of the millions of people in the world who participate in the market. If the EUR / USD price goes up, you make money and vice versa the price goes down. View your current profit / loss in the Open Positions window. . If you want to close a position, simply press the X button in the open position window to close the trade.
Long and short trading
In the example above, we expected the Euro (EUR) to rise relative to the US Dollar (USD), so we bought EUR / USD and wanted to sell at a higher price. This is called a long position. But if we expect the EUR to fall relative to the US dollar, what should we do? If this is the case, you do the opposite: sell EUR / USD, and then look to buy back at a price thereafter. Short trading allows you to profit when the exchange rate drops.