A Good Place to Start Your Journey in Forex Education.
At TradeForex.NG we have put together a number of articles that will help you start your journey in Forex education, and we will continuously add more to ensure that you are prepared for trading. Here we explain what Forex is and how it works. We have put together a Forex Glossary to explain terms related to trading suitable for any beginner.
If you would like to learn how to trade Forex or are looking for trading signals or Expert Advisors, this Forex Education section is the place to start so that you can really see if trading Forex is your thing, and if so, that you’re prepared to begin.
So Exactly What is Forex?
Forex is the name of the international interbank foreign exchange market (and is short for Foreign Exchange Market).
Its daily turnover is around $5 trillion, making Forex one of the largest segments of the global financial industry and one of the most lucrative markets for private investors.
Forex is an informal network of trade relations between the parties throughout the world, which include central banks, commercial banks, investment banks, brokers and dealers, pension funds, insurance companies, multinational corporations, and various private investors. All major currencies are traded in this market. The main role of the Foreign Exchange Market is owned by banks, which are called market makers, as they make active trading, offering to buy or sell the currency to its clients and counter-party banks.
And What is Traded in Forex?
The answer is simple; money! When we speak of money, we mean the world’s major currencies. Unlike other markets, you are not buying and selling tangible goods, but simultaneously buying and selling money of different currencies. Buying currency in the Forex market can be considered as a purchase of shares.
When you buy the US dollar, in fact, you buy a ‘share’ in the American economy. It is like betting with the market that the US economy is doing well, and it will grow. If it does grow, then you will want to sell that share which hopefully is more expensive by then, which results in you making a profit, since you are selling it for more than you originally bought it for. The bottom line is that the exchange rate of the currency against other currencies is a comparison of the economic conditions in a country with the economic conditions in other countries.
The main currencies of the Forex trading market are also referred to as ‘major currencies’. They are characterized by high levels of trading volume in Forex. The US dollar definitely takes the first place. In second place is the Euro (in terms of Forex trading). Then in third place for a long time was both the British pound and the Japanese Yen. Recently however, the Yen has gained the upper hand.
Major currencies constitute currency pairs – the main financial instrument in the Forex market.
USD = US Dollar, used in the financial slang, buck (buck)
EUR = Euro, the single European currency
GBP = British pound sterling, to finance slang also used the name “pound» sterling, cable
JPY = Japanese yen.
CHF = Swiss franc, also known as “Suisse» (swissy) used in the financial slang;
CAD = Canadian Dollar, slang – Loonie
AUD = Austraian Dollar, slang Aussie
NZD = New Zeeland Dollar, slang – kiwi
As you can see, currency symbols always have 3 letters, the first two letters represent the name of the country and the third letter is the name of that country’s currency. For example GBP – GB is Great Britan and P stands for Pound. (exception is EUR for EURO)
Advantages of Trading Forex
The Forex Foreign Exchange Market has several clear advantages, thanks to which the trader can be anyone, regardless of nationality, ethnicity, income and education:
- Flexible Availability (Trading is available 24 hours a day, 5 days a week!)
- High liquidity
- Low price deals
- Leverage principle
- No restrictions
- No one can influence the market
Best Time to Trade Forex
We’ve written a longer explanation to when The Best Time to Trade Forex is, where we explain the different trading sessions, and specifically in relation to Nigerian timezone and when the best and worst time to trade is. Did you know for example that it’s possible to trade Forex on Sundays in Nigeria?
Every trader has to start somewhere. Our article What is a Forex demo account and why do we need it? helps beginners learn about the importance of using Demo accounts for practice.
In addition to choosing a broker you should also consider trading platform that you would like to use, and in online trading there are several options to pick from. MetaTrader 4 in particular, is a very popular trading platform used by many brokers worldwide. You can read more about MetaTrader (MT4) here.
Training in Trading
Take a look at the following articles to learn the basics of trading.
Understand how price changes are measured and how to calculate the cash equivalence in What is a Pip in Forex?
Find out how to use a Profit calculator to estimate your gains in What is the potential profit in Forex and how to calculate it?
Keeping trades open results in swap fees. Find out more in What is a Swap and why we pay Swap Rates?
Find out what slippage is and why it occurs when you trade in What is Slippage?
And for a much easier way of trading, some automated Trading Signals might be the best option.
Finding the Right Broker
With so many brokers it can be difficult choice in deciding which one to sign up with. Find out here about Forex Broker Types: Dealing Desk vs No Dealing Desk – STP, ECN, Market Maker to understand more about them. Take a look here for our 7 Criteria for choosing the best Forex Brokers article to help you decide.
Learning More About Trading
It’s time to start getting technical! Have a look at the Types of Trading Orders in Forex that exist so you can understand a bit more about what goes on when you’re using the trading platform to open orders.
Not only should you understand how the platform works, but you should also understand how to make informed decisions when trading to increase your probability of success. In Types of Forex Analysis we examine the common methods of analysing the factors that influence markets and therefore your profit. In Risk Management in Forex Trading we explain why it’s important to have a plan and list some steps you should take when trading.
Making Trading Easier
Still don’t know anything about Forex but want to jump into trading? With Trading Signals, you are able to automatically copy someone else’s trades and avoid making the decisions on what to buy or sell or when to do it yourself.
More Forex Education Articles
Have more questions? Click here for some Forex FAQs