Forex is an economic term that refers to the exchange of different currencies in a distributed global market. Over the past years, several traders have become greatly interested in the field of forex as the forex market is one of the top financial markets in the world and is distinguished by its liquidity. Moreover, the Forex market encompasses a great number of banks, brokers, independent investors, and managers. In this article, we will cover the most important aspects of the market, namely forex sessions, and forex strategies to help new traders understand how the market works.
What do I Need to Start?
If you want to start your way in Forex, you won’t need much. Most of the trading is performed through brokers. To illustrate, brokers are companies offering access to the market. Forex trading is done on the Internet, so you will be given forex software to buy and sell currencies. The software systems of Forex are called Meta Trade 4 and 5 (MT4 and MT5). You can download the platform easily and even work using your mobile device.
How does Trading happen?
The market of forex makes about $ 5 trillion per day and doesn’t have a fixed headquarter or specific working hours. It opens 24 hours a day from Sunday evening to Friday evening. Currencies are exchanged in pairs as buying a certain currency always translates to selling another currency. Individuals, organizations exchange currencies and profit from the change in rates. The market generates constant competition between the currency pairs, on which selling and buying depend. The market is full of currencies, including major world currencies and developing currencies.
What are the Cons of Forex Trading?
Forex is known for being a risky realm. Trading in Forex is akin to diving in dangerous waters, and some of these risks include:
-Squandering your entire capital
– As mentioned before, the market is characterized by considerable volatility, which alters your account funds and might lead your account to be suspended if you don’t have enough money.
-Financial can fluctuate due to volatility which can cause stop-loss orders to be executed at unfavorable prices.
What are the Pros of Forex Trading?
– The Free Market: Even if you don’t have a huge sum of money, becoming a forex trader won’t be difficult because the market gives you ample freedom to start with any amount of money you want. You can even start with $100!
– You can be your own boss and work from your home and at the time you prefer. You are not governed by any daily number of working hours you should make.
– The market is littered with disciplines, account types, and strategies that you can optimize and learn from to become an accomplished trader.
How does the Forex Market look like?
The forex market opens 24/5, which gives a great opportunity to traders to strike many deals at their convenient time. The market mainly revolves around trading exotic pairs –a pair that includes a major-country currency and an evolving-country currency. The market is full of various factors that influence the relationship between currency pairs, and they all contribute in one way or another to determining whether the strength of one currency decreases or improves against another.
The forex market sessions: when and how is it possible to Exchange currencies?
Forex has no physical headquarters in a particular place, and the exchange of currencies is carried out according to supply and demand. However, the sessions are the best times to trade forex as they involve an abundance of traders and organizations working at the same time, which increases your chances of making good deals. Let’s delve into the forex market sessions and their characteristics:
– Asian session (in Tokyo): Most transactions are performed on a currency pair that includes the Yen, which is the Asian currency. The session takes place at the start of the week and is usually held between 11 pm and 8 am GMT. Once the Asian session closes, the London trading session begins. The Asian session is not very volatile, so if you are looking for strong market movements, wait for the London session to open. The session represents 15% of daily trading.
– European Session (in London): About 30% of all forex transactions take place during the London trading session. During this last session, the market conditions are more volatile and a certain number of transactions take place during this trading period. The London and New York session tend to overlap for few hours.
– American session (In New York): The New York session accounts for 25% of daily trading. Economic news regarding the USD and CAD currencies spread during the New York session. After the close of European markets, volatility and liquidity tend to decline during the late afternoon of the New York trading session.
Is Forex Risky?
Yes, it is. Although Forex turned a plethora of people into masterful businessmen and yielded considerable sums, it affected people negatively. However, the trade is risk-worthy because, in the long run, it can give you more than your time and effort provided that you back your trade with knowledge and effort. Forex is akin to any other trade as it needs hard work and doesn’t give you gain without pain. Fortunately, understanding Forex and the financial market is not an arduous task. Anyone can learn how to trade Forex and use the accessible platforms easily. Don’t listen to those who say that Forex is a sheer trap, yet at the same time, you should realize the risk it involves and see the big picture.
Laconically, Forex is the trade of the era as it offers multiple opportunities for all traders, including beginners and traders who don’t have huge capital. In this article, we tried to give newbies a comprehensive view of what forex is and how they can worm their way into such a wide field. We recommend that you read more about this type of trade to broaden your scope of knowledge.