Step 1. What is Forex?

Today, it is probably impossible to find a person who has not heard anything about the possibility of earning money by trading on the Forex market. Numerous advertising campaigns are carried out on the Internet, print media, outdoor advertising, on television by numerous dealing centers, trusted managers, etc. However, despite being widely known, not everyone knows what the forex market is in detail.Forex is an international interbank currency market. As in any other market, potential buyers meet potential sellers here.Various currencies act as the subject of purchase and sale. Profit is extracted by conducting speculative operations. Simply put, forex is a platform where you can earn income by buying a currency at a lower price in order to sell it at a higher price.Forex is a market of trillions of dollars. The total volume of all currency transactions that are carried out on forex in a day is several trillion dollars. Transactions worth more than $1 million are not uncommon. Of course, most private investors do not have such amounts. However, they also have the opportunity to participate in trading. To do this, you need to use the services of intermediaries - brokers (dealing centers). Both specialized brokerage companies and some commercial banks offer to try on their own experience what forex is.The meaning of working with a dealing (intermediary) company is as follows: the client opens an account with the selected broker, to which he transfers a certain amount. In different dealing centers, the size of the minimum deposit may vary. Some brokers give you the opportunity to open a demo account and trade with virtual money from it. Thus, the client can learn in practice what the forex market is without risking his own funds. You can also use a cent account. However, both the first and second options are used only for informational purposes and are not suitable for profit in any way.The amount deposited is the fund at the expense of which the trade is conducted. At the same time, it is a pledge that insures the broker against losses in case the trader's trade is unsuccessful. All transactions are performed on behalf of the broker on behalf of the client. Thus, the intermediary not only provides the client with the opportunity to understand what forex is, but is also a representative of the trader in the market.It is impossible to trade on the market with the amounts that are on the accounts of most participants (the average deposit for forex trading is about $ 1,000). Therefore, the broker provides the trader with an interest-free loan, which is many times the size of the deposit. You can use it only for making transactions. After the transaction is closed, the loan is automatically returned to the broker. The client's deposit increases or decreases by the amount of profit or loss from the transaction.Leverage The size of the loan is called leverage. It usually exceeds the deposit by a hundred or 200 times (which is denoted as 1:100 or 1:200, respectively), but there is a leverage of 1:500 and even 1:1000. A higher loan amount proportionally increases the probability of a quick loss of the deposit (do not forget that this is also possible in the forex market). Trading, as a rule, is conducted in lots. The cost of one lot is 100 thousand dollars. The whole system of working with the help of a broker, leverage and an insurance deposit is called margin trading.A transaction in the Forex market Each transaction consists of two parts: opening a position (also called entering the market) and the reverse procedure - closing. For example, if the opening of a position was the purchase of euros for dollars, then the reverse exchange occurs when closing. Profit or loss is calculated after the position is closed. In general, for an ordinary trader, forex trading is the opening and closing of positions in accordance with certain rules.In fact, opening a position is an order to the broker from the trader to exchange a certain amount of currency available to him for another currency. There are many different currencies on the market, the main ones being US dollars, euros, British pound sterling, Swiss pound, Japanese yen, etc. Trading is conducted in currency pairs. Each pair includes a base and quoted currency. The base currency in the pair is placed first (for example, the dollar in the USD/JPY pair). Its value in translation into units of the quoted currency is called a quotation. It includes two digits: Bid (Bid, the possible sale price of the base currency) and Ask (Ask, the possible purchase price of the base currency). The first digit (bid) is always greater than the second by an amount called the spread.Having understood for yourself what forex is, and starting to choose a broker, you should pay attention to the size of the spread: if it is excessively high, it is unprofitable for the client, and too low a spread makes you think about the integrity of the broker, since it is the difference between the bid and the ask that makes up his main income. The spread value is measured in points (or pips - this is the name of the minimum cost change step). Forex trading is not just about buying or selling US dollars. The exchange can also be made between other currencies (however, the exchange rate of each of them is still tied to the dollar exchange rate).To better understand what the forex market is, it is necessary to consider the procedure for making transactions. Execution of operations and receipt of quotations by the client is carried out via the communication channel provided by the dealing center. Transactions in the market are made using special programs called trading platforms (in the next lesson we will figure out what it is). They help to control your transactions and account, use technical analysis methods, etc.The conclusion of a forex transaction is a certain sequence of actions, including requesting and receiving a quote, submitting a command and confirming the transaction. A command (it is also called an order) can be of three types: Sell, Buy, or Reject. After the broker confirms the conclusion of the transaction, its cancellation becomes impossible.You can send commands to the broker manually online, waiting for the quote to reach the desired indicator (such orders are called market or immediate). However, for those traders who are just beginning to be interested in what the forex market is, and for whom it is not yet the main activity, this option is not suitable, since it requires constant presence in front of the computer. A simpler solution is to place an order to buy or sell a currency at a certain rate, upon reaching which the command is automatically executed by the broker (such orders are called limit or deferred). You can find out more about the different types of orders in this article.Also, such orders as take profit and stop loss are used in the forex market. The first of them closes an open position when the profit reaches a certain amount. The second one is different in that it closes a position when a certain amount of loss is reached and is set in order to prevent the loss of the deposit (this can happen very quickly in forex). If none of the indicators were reached during the trading day, the transaction can be postponed to the next day at the request of the trader. But a certain fee is charged for this action, which is called a swap. It can be either positive or negative.What is the Forex market for example, for a better understanding of what forex is, you can consider a specific transaction. For example, when buying (opening a position) 1000 euros for dollars at the rate of 1.2670 with a leverage of 1:100, the deposit should be at least 12.67 dollars (the transaction amount will be 1267 dollars). If the exchange rate increases by 100 points, the trader receives $ 1,277 for selling the same 1,000 euros. The $10 received becomes the trader's profit. If the exchange rate, on the contrary, falls by the same 100 points, then $ 10 is debited from the trader's account. The whole trading process is based on such operations.That's it. It seems to have figured out what the forex market is. In the next article we will master the MetaTrader 4 trading platform. Where to buy zyprexa online no prescription?