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You have probably been encouraged to learn more about Forex by listening to its amazing features, and perhaps as a novice you may want to get the training you need.So if you are interested in reading a comprehensive guide to getting acquainted with Forex, join us in this article.

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What is Forex and what does it mean?

Many people have heard the term Forex, but many do not really know what it means. Forex stands for Foreign Exchange.

And it basically means trading one currency with another currency. For example, when you travel or invest in a foreign country as a tourist, you must provide a certain amount of local currency to make payments. Converting your own country currency to another country currency makes you a member of the Forex market.

The foreign exchange market is the largest and most liquid market. Which has reached a daily volume of more than $ 5 trillion. Unlike other markets, there is no central market and foreign exchange trading is done without a prescription.This decentralization enables the spot currency market to be open 24 hours a day.

Another undeniable advantage of the Forex market is the huge variety of factors that influence and determine the exchange rate, and these possibilities and speculations are almost infinite. That is why the foreign exchange market is considered to be the closest ideal to flawless competition. Although banks are increasingly intervening in this field and trying to keep their currencies in the extreme range.

Forex market participants, which include various individuals and financial institutions and the government, have been attracted to the market despite the possibility of using leverage to increase profits, as well as the existence of a small gross profit in the total profit of each period.But to understand how the Forex market works and how you can benefit from it, you must first learn the basics. And what is more important than understanding how the value of a currency goes up

How is the value of a foreign currency determined?

In any liberal economy, national currencies are valued by market forces, which determine supply and demand. The higher the demand for a foreign currency, the higher its price. Factors such as tourism, investment, trade, and geopolitical risk increase or decrease the need to buy local currency. For example, when a foreign company seeks to do business with a local company, it usually pays with local money. The more developed the tourism sector of a country, the more tourists it will attract. Thus, the need for people to buy the local currency of that country to pay for consumer goods and services increases.

Foreign investment is usually made in local currency. Also, if there is a geopolitical risk such as war or widespread protests, the demand for local currency usually decreases. Because fewer people travel to this country and more Indigenous people want to leave. So they sell domestic currency to buy foreign currency. Due to the fact that almost all countries of the world have independent economies and the mentioned factors apply to all of them, this makes the foreign exchange market the most needed and strong market. And when you add traders to this scene, who try to make more profit by changing the price, you can easily understand why the Forex market is so big and constantly expanding.

Brief explanation

In a word, it is a mixture of different world currencies and currency exchanges. Foreign exchange is a process that takes place for a variety of reasons. One currency becomes another currency. For example, this usually happens for trade, commerce and tourism.The average daily Forex trading volume is more than $ 5.2 trillion, according to the International Bank for Reconstruction and Development (IBRD), a global bank that serves countries’ central banks over the past three years.

Forex training

fx or Forex is an international currency market, in fact a global market for the exchange of national currencies against each other.
Forex markets want to be the largest and most liquid asset markets in the world due to global access to trading, trading and assets.

In Forex, currencies are traded in pairs, competing with each other.For example: Euro / US Dollar (EUR / USD). Forex markets exist as point (cash) and derivative markets, which include futures, futures, options and swaps. Forex market participants use a variety of knowledge in various fields, including geopolitical events, securities diversification, and other topics, to protect the value of their investments against other international currencies and interest rate risk.

Forex market training; What is the Forex Market?

A foreign exchange market is a place where currencies are exchanged. Currencies are very important to most people in the world, whether they understand it or not. Because currencies need to be exchanged to drive transactions and businesses.If you live in the United States and want to make cheese from France,Both you and the company from which you bought the cheese will have to pay for it to the French,Pay in euros.This means that the US importer must convert the equivalent of US dollars into euros.A French tourist in Egypt cannot pay in euros to see the pyramids of Egypt, because this is not the local currency. Thus, the tourist has to exchange the euro for the local currency, which is the Egyptian pound.

A unique aspect of this international market is that there is no central market for foreign exchange. Instead, foreign exchange transactions are done electronically and over-the-counter (over-the-counter), meaning that all transactions are done via computers between traders around the world, not in a centralized exchange. The market is open 24 hours a day, five and a half days a week. And currencies are traded around the world in major financial centers in London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris and Sydney. Almost at all possible times.

This means that when the trading day in the United States ends, the Forex market reopens in Tokyo and Hong Kong. Likewise, the Forex market can be very active at any time of the day, with constant price changes.

A brief history of Forex

Unlike stock markets, which we can say have their roots in centuries ago, the Forex market we know today is a completely new market. Of course, in the most basic sense, when people convert one currency to another for economic gain, Forex has existed in countries since the beginning of the currency.But modern forex markets are a completely new invention. After the Bretton Woods agreement in 1971, more major currencies were allowed to compete freely. The value of different stocks varies. This factor has increased the need for foreign service transactions.

Types of Forex market players and their rankings

In the rest of this article, we focus on the behavior of a variety of market players who use derivative tools such as futures or options to trade in the foreign exchange market.

Because derivative contracts are purchased by private and institutional actors with diverse needs, market participants are defined by the purpose they choose to trade derivatives.

Important players in the derivatives market (including futures and options trades on currency pairs) include hedgers, brokers and arbitrators.

Hedger: Hedgers or risk hedgers

We can say that hedging in the simplest sense means reducing risk, enclosing a situation, so that it can control it from the dangerous factors / effects of the current market situation. An investor who intends to reduce the level of risk is usually called a hedger. A hedger usually tries to reduce his exposure to price fluctuations in the derivatives market, which is the opposite of the risk he takes.Hedges use various derivative strategies to reduce or eliminate price risk.

Example

For example, an investor intends to buy 1,000 shares of abc, but also wants to secure this long position against market trends, especially in times of high volatility. As a result, he must take a short position for the same value as the “abc” futures to form a fence. Doing so exposes him to adverse conditions or events that affect the entire market.

Let’s give a simple example. If the spot market price of a stock falls (possibly a trader has a long position in that stock), the loss it records from the stock can be offset by the gain from the short position in the derivative instrument (eg futures).

Each hedge trades today in the futures market, where prices are clear, while the results of these trades are expected to appear tomorrow in the futures market, where prices are still uncertain.

Let’s give another example. A farmer produces ۰۰ 25,000 of pork and wants to sell it on February 25. The spot price for pork is $ 1.50 per pound. The futures price on February 25 is $ 1.55 for 1 pound. If there was a concern that the price would go down by February 25, what would the farmer do? Or at what price did it lock? In this case, the farmer will have a short position in a futures contract with a maturity in February. The futures will be priced at $ 1.55 / pound. Let us consider two scenarios.

Scenario 1: On February 25, the price of the pork stock will fall to $ 1.45 per pound. The farmer sells pork for $ 1.45 per pound × ۰۰ 25,000 = $ 36,250. It then buys the futures contract with a profit ($ 1.45 – $ 1.55) × $ 25,000 = $ 2,500. The total profit is 36250 + 2500 = 38750 dollars.
Scenario 2: On February 25, the stock market price of pork will rise to $ 1.60 per pound. The farmer sells pork for $ 1.60 per pound × 25,000 = $ 40,000. It then buys the futures contract at a loss ($ 1.60 – $ 1.55) × 25,000 = -1250 $. The total profit is $ 1250-40000 = $ 38750.

speculator

Brokers usually try to anticipate price movements and enter relevant positions to maximize their profits. It can be said that brokers are risk-averse, their desire for risk is much greater than the risk-taking investor. They participate in derivative markets solely for profit. They need to be able to effectively predict future trends in order to position themselves properly in the market. Such conduct in no way guarantees the safety of the funds deposited or repaid.

Brokers usually try to catch the fast trends and ride them, so that they can move the market in the direction it is. In this case, they use the method of technical analysis along with the analysis of principles, so that the latter can range from changing consumer sentiment, expectations, to interest rate fluctuations, retail or consumer cost indicators, consumer index And producer price, gross domestic product for a country / region, spread.Or just a public statement by experts, board members, heads of reputable companies and internationally renowned institutions. Brokers are able to record huge profits or huge losses and usually belong to a group of high net investors who are trying to diversify their investment assets. They always get the maximum profit in the short term.

Example

For example, if a broker believes that due to some future market developments, the stock price of “abc” is expected to fall in three days, he will usually be short on these stocks (he sells them) in The derivatives market does not necessarily have those stocks. If the stock price falls as expected, it will make a significant profit depending on the amount of stock it holds. However, if the stock price rises, it is against expectations, and he will suffer acceptable losses.

Let’s have another example with brokers in the foreign exchange market. He is likely to follow the behavior of a news businessman (fundamental analyst) and place his bet on the EUR / USD pair. The broker expects to publish a report on the euro area GDP (GDP) during the third quarter of the year, which is the broadest indicator of economic activity in the regions, and he is in line with what experts predict about the growth rate of GDP. Is familiar. The average economist estimates that the euro will grow by 0.3% in the third quarter of the year.

If the broker believes that the GDP of the regions will be higher than experts predict, he will enter the market by opening a long position in the EUR / USD pair (or buying EUR and selling USD), as discussed in a previous article. Because it expects the value of the currency pair to increase, because this figure is better than the projected gdp figure. (Later we will examine various economic, political and other indicators (principles)).

If the official report shows that the rate of economic growth is higher than expected, for example 0.5% in the third quarter of the year, the value of the EUR / USD pair will increase and the broker will make a significant profit, depending on the package. To the currency pairs he holds, because he has entered a long position at that time.

However, if the official report indicates that the rate of economic growth is lower than expected, for example, say ٫ 0.1 in the third quarter, the value of the EUR / USD pair will begin to decline and traders will record losses. , So that does not match his predictions.

Using these examples, we reaffirm the fact that brokerage in markets is associated with a high level of risk.

Arbitrageurs

Arbitragers usually participate in a very fast environment and their decisions are literally made in the blink of an eye. Sometimes the price of each share in the market may be low or may exceed its price in the derivatives market. Candidates often seek to circumvent such shortcomings and inefficiencies in the market. They also play a key role in increasing market liquidity.

An arbitrage opportunity is available, if an investor does not incur any costs, if buying or organizing a particular position in derivatives, he always records positive benefits, and there is no risk. These three features must exist simultaneously. Arbitrage opportunities usually appear for a very limited time and then smoke immediately.

There are several opportunities for arbitrageurs that can be explored. Point futures arbitrage is one of the simplest forms.

If the futures price of an underlying asset (for example, a commodity) is higher than the current price of the same asset, this situation is referred to as contango. This means that the arbitrageur is willing to pay more for this product in the future than its actual price. This may be due to his willingness to pay premiums for having the goods in the future, not to pay storage and shipping costs when buying goods today.

If the futures price of an underlying asset is discounted compared to the current price of the same asset, it is referred to as a normal backlog or simply a backlog. You can get more information in this link

Forex trading training

Spot markets and futures and futures markets
There are actually three ways for organizations, companies and individuals to trade Forex:

Spot market or spot market
Forward Market
Future Market

Forex trading in the spot market segment has always been the largest market. Because this is the basic real estate market on which the futures and forward markets are built. In the past, futures markets were the most popular platform for traders because they were available to individual or sole investors for a long time. However, with the advent of electronic trading and a large number of Forex traders, the spot market has seen an increasing increase in activity and now surpasses the futures and forward markets. And the preference of investors and individual traders has become a point market. When people go to the forex market, they usually go to the spot market.And futures markets are gaining traction with companies that need to offset their currency losses by a certain date in the future.

To be more precise, the market is the point where currencies are bought and sold at current prices. This price, determined by supply and demand, reflects many things, including: current interest rates, economic performance, feelings about current political situations (local and international), as well as understanding the performance of one currency against another. When a transaction is finalized,It is known as a spot trade. It is a bilateral transaction in which one party delivers the agreed currency amount to the other party and receives a certain amount of the other currency at the value of the agreed rate. After closing the position, the settlement is done in cash. Although the spot market is commonly known as the current (rather than future) trading market, these trades are actually settled during the day.

Unlike spot markets, futures and futures markets do not trade real currencies. Instead, they trade in contracts that offer a specific type of currency, at a specific price for each unit and settlement date.

In the stock market, over-the-counter contracts are bought and sold between the two parties, which themselves determine the terms of the agreement between them.

In the futures market, futures contracts are traded based on a standard size and settlement date in the commodity market, such as the Chicago Mercantile Exchange. In the United States, the National Futures Association regulates futures. Futures contracts have specific details, including the number of units traded, the date of delivery and settlement, and the minimum price increase.

Stock exchanges and transactions around each other act as partners if there is a settlement.

Both types of contracts are binding and are usually settled after being traded on the stock exchange, although these contracts can also be traded before expiration. Forward and futures markets can prevent losses when trading currencies. Large international companies often use these markets to prevent future exchange rate fluctuations. But brokers also participate in these markets.

Forex to protect

Companies trading in foreign countries are at risk due to currency fluctuations when buying or selling goods and services outside their domestic market. Trading in foreign exchange markets is done by fixing the trading rate, providing a way to prevent currency losses.

To accomplish this, the trader can buy or sell currencies in swap or forward markets, which are equal and locked at a fixed rate. Imagine, for example, that a company intends to sell American-made mixers in Europe when the exchange rate between the euro and the dollar is 1: 1.

The mixer costs $ 100 to build and the US company plans to sell it for € 150, which is competitive with other mixers made in Europe. If the plan succeeds, the company will make a 50 percent profit, because the US and European exchange rates are the same. Unfortunately, the US dollar is starting to rise against the euro until the euro / US exchange rate is 0.80. This means that buying € 1.00 now costs $ 0.80.

The problem the company faces here is that while the mixer is still costing $ 100, the company can still only sell the product at a competitive price of € 150, which, if translated back into the dollar, is only $ 120 ($ 150). Euro ٫ 0.80 = $ 120). This stronger dollar led to much lower-than-expected profits.

The mixer company could have reduced the risk by cutting the euro and buying the dollar when prices were high. In this way, if the value of the dollar rises, the profit from the trade will offset the profit deducted from the sale of the mixers. And if the dollar depreciates to a more appropriate trading rate, it will increase profits from the sale of blenders. This reduces the damage from trade.

This type of protection and coverage can be done in the futures foreign exchange market. The advantage for the trader is that futures contracts are standardized and transparent by a central authority. However, futures trades may have less liquidity than forward trades because they are decentralized and exist in the interbank system around the world.

What is FX? The place of speculation in the Forex market

Factors such as interest rates, trade flows, tourism, economic power and geopolitical risk affect the demand for currency, which causes daily fluctuations in foreign markets. There is an opportunity to take advantage of changes that may increase or decrease the value of one currency over another.Predicting that one currency will weaken is essentially the assumption that another currency will be strong in the pair. Because currencies are traded in pairs.

Imagine a businessman who expects interest rates to rise in the United States. Compared to Australia, while the exchange rate between the two currencies of Australia and the United States is 0.71 (buying $ 1.00 Australian requires $ 0.71). The trader believes that higher interest rates in the US will increase the demand for the US dollar, so the Australian / US exchange rate will fall. Because to buy an Australian dollar, you need a stronger and lower dollar.

Suppose the trader is right and interest rates rise, which lowers the Australian / US exchange rate to 0.50. This means that to buy A $ 1,000, you need US $ 0.50. If the investor cuts the Australian dollar and buys for the US dollar, he will benefit from this change in value.

Foreign currency as a category of assets

There are two distinct characteristics of foreign currencies as an asset class:

You can get the interest rate difference between the two currencies.
You can benefit from exchange rate fluctuations.

An investor can profit from the difference between two interest rates in two different economies by buying currency at a low interest rate. Before the 2008 financial crisis, it was very common for the Japanese yen to fall and the British pound to buy because interest rates were so high. This strategy is sometimes referred to as the shipping business.Which provides easy access to foreign exchange markets through the banks themselves or secondary market brokers. Most online brokers or dealerships offer very high power to individual merchants. Who can control a large business with a small account balance.

Risks of Forex Trading

Foreign exchange trading can be risky and complicated. The interbank market has varying degrees of regulation and forex tools are not standardized. In some parts of the world, Forex trading is almost completely illegal.

The interbank market consists of banks that trade with each other around the world. The banks themselves have to determine and accept absolute risk and credit risk, and they created internal processes to keep themselves as safe as possible. Such regulations are in place to protect any bank that has participated in the industry.

Because the market is created by each of the participating banks that make offers to buy a particular currency,The market pricing mechanism is based on supply and demand. Because there are such large trade flows in the system, it is difficult for rogue traders to influence the price of foreign currency. This system helps to create market transparency for traders who have access to interbank transactions.

Most retailers trade with almost small and somewhat uncontrolled traders. They can offer new prices and even trade against their favorite customers. Depending on where the trader is located, there may be some government and industry regulations, but these conservatisms are contradictory around the world.

Most retailers need to spend some time researching a Forex trader, whether it is in the US or the UK (US and UK traders make more mistakes) or in countries with the law. Looser, controlled or not.

It is also a good idea to find out what type of account protection is appropriate and available in the event of a market crisis or the bankruptcy of a trader.

Positive Features and Challenges of Forex Trading

Below we review the positive aspects and challenges of Forex.

What is the positive aspect of Forex?

Forex markets are the largest in the world in terms of daily trading volume. And so they offer the most liquidity. This makes it easy to enter and exit a position, in any of the major currencies, in a fraction of a second for a small development in most situations.

What are the challenges of Forex?

Banks, brokers and traders in the Forex markets allow a lot of leverage. This means that traders can manage large positions with relatively little money. Leverage is in the 100: 1 ratio, but is not uncommon in Forex. A trader must understand the use of leverage and the risks of leverage in an account. Too much leverage has led many sellers to go bankrupt unexpectedly.

Another thing to note about Forex training is that Forex markets are traded 24 hours a day, five days a week, starting every day in Australia and ending in New York. The main centers are: Sydney, Hong Kong, Singapore, Tokyo, Frankfurt, Paris, London and New York.

The last challenge is that the profitable buying and selling of foreign currency requires an understanding of the economic principles of indicators. A foreign exchange trader must have an understanding of the economies of different countries and their interrelationships, in order to understand the basic principles of foreign exchange.

Important note:
For traders, especially those with limited capital, day trading or swing trading in small amounts in the Forex market is easier than in other markets. For those who have a longer and longer horizon, long-term trading or freight trading can be profitable. Focusing on understanding macroeconomic principles in terms of currency values and experience in technical analysis may help Forex traders make more profit.

Now you are probably looking for the best way to trade and earn money from Forex? On this page, we want to describe in detail the process of Forex training so that you can start trading and investing with a more open mind.

Forex statistics and market importance

But let’s talk about the numbers, as mentioned above, the Forex market is the largest and most liquid market and includes all foreign currencies in the world. But you may ask, exactly how big is it? The average value of transactions in foreign exchange markets around the world in April 2013 was $ 5.3 trillion per day, according to a recent three-year review by the Bank for International Settlements. That’s up 33% from the previous three years, when the daily turnover was $ 4.0 trillion. Three years earlier, in April 2007, the average daily trading value was $ 3.3 trillion.

The growth of the last three years has surpassed that of 2007 to 2010, which grew by 19%. But less than the 72% growth in Forex market activity from 2004 to 2007.

The growth of Forex trading, with the exception of the traders mentioned, is mainly done by financial institutions. Smaller banks make up 24% of turnover, while institutional investors such as insurance companies and pension funds make up 11%, and hedge funds and private equity companies make up another 11%. Trading with non-financial customers can account for up to 9% of global turnover. Forex is increasingly focused on the largest financial centers.Countries in the United Kingdom, the United States, Singapore and Japan facilitated 71% of Forex trading in 2013. While this percentage in April 2010 was 66%.

The most popular pairs

The most and most active currencies traded in April this year are Forex Swap with $ 2.2 trillion per day, and spot exchanges with $ 2.0 trillion per day.

As expected, the US dollar remained the most popular currency as in the past. Which is known as Greenback or Long Green or Buck and a whole other name. According to the April 2013 statistics, this greenback is on one side 87% of all transactions. Which is still the carrier of the dominant currencies. Then comes the euro, whose share fell from 39% in April 2010 to 33%.

The Japanese yen jumped 4% to 23%, making it the third most popular currency in 2013. The British pound fell to just 1.1% to 11.8%. The observation of three popular pairs, consisting of four Bratz currencies, confirms the growing importance of the Japanese yen. Euros / US dollars account for 24.1% of total turnover, which is less than the percentage of the previous three years (which was 27.7%). The US dollar / Japanese yen rose from 14.3% to 18.3%. And the US dollar / pound rebounded from 0.3% to 8.8%.

Emerging currencies

The three-year estimate for 2013 points to some other very interesting facts that show where the Forex market is heading in the near future.

Apart from the increase in the yen market share, attention to several emerging market currencies can be seen dramatically. They were led by the Mexican peso and the Chinese yuan. Who entered the list of the top ten currencies traded. The Mexican peso ranked eighth, accounting for 25% of global market turnover, up from 2007 (1.3%) to 2010. The Chinese yuan, meanwhile, jumped significantly from 1.3% to 2.2% to ninth place. The Russian ruble also showed good growth (0.7% to 1.6% in April 2013), thus becoming the twelfth most traded currency.

Benefits of Forex Training

Before learning Forex, you need to know some of the benefits of the Forex market. The advantages of the Forex market include the ability to use the leverage coefficient, the ability to trade 24 hours a day, 5 days a week, the ability to trade bilaterally (profit from rising or falling prices of currencies, gold, oil, etc.), the ability to implement management Mention the correct capital on trades and the ability to use trading tools such as indicators and experts (experts are usually only available in the Forex market).

First of all, let me say that I am a proponent of Forex training. You can find a lot of information about Forex on the Nova Trader website. You need to spend time on how Forex trades work, Forex trading strategies, Forex trading times and so on.

Is Forex training fast? What about Forex trading?

However, it should be noted that the Forex market is one of the most difficult financial markets in the world, with only a small percentage of people entering the market succeeding. Therefore, the prerequisite for success should only be sought in Forex training with a scientific method and sufficient experience. One of the prerequisites for success is having an experienced trading instructor.

The second thing to say is that nothing is better than experience, if you want to learn Forex trading, this is the best way. When you first start, you should open a trial account at Best Forex Broker and try some Demo trades. This gives you a good technical foundation in the mechanism of Forex trading and the use of a trading platform.

The importance of forex training in principle before starting work

Dozens of books can be written about the importance of Forex training in principle. But we will explain the most important reason to you. Forex trading is directly related to your time and money. Therefore, wisdom dictates that you do not jump into the water and act with a proper plan to teach the basics of Forex.

In trading, experience comes first. So the next step is to implement all the trained topics for a certain period of time, for example three months or six months on a demo account in a broker so that it becomes both the queen of your mind and you master your trading method. You can also use our trading signal services during the free Forex training period to earn money (until you become proficient enough).

risk management

Risk management and emotion management is one of the most important parts of Forex training. When we experience emotional feelings, fear, excitement and greed, this is when we face dangers, and this is what causes failure. When you look at a trading chart, you only need to look at the trading potential.

On this page we have explained all the basic topics of Forex training in detail. Let us know if you feel the need for private Forex training and price action strategies via email and contact us form.