The Forex founded in 1971. Today the current turnover of the Forex is said to be over trillion dollars a day compared to the stock market’s turnover of about 10 billion a day.
Major currencies have been trading on the Forex are the US Dollar, Japanese yen, British pound, Swiss franc and the Euro.
Investors can trade on the Forex platform from any location, using mobile services, the Internet or secured access. Traders can also trade for long periods or decide to trade just for a day.
Another exciting fact is that the Forex market (unlike other foreign exchange markets or the stock market) does not have a closing time, so you can trade 24/7 (in 365 days). Forex trading includes a measure of risk. That is, you can gain a lot of money or lose money. However, you can operate on lower risks by making use of market analysis methods just as discussed below, in addition to “stop loss” and “take profit” order mechanisms available to traders.
Factors that influence the platform of the Forex market include the transfer of capital between countries, economic factors (such as interest rate and inflation differentials, equity market flows, etc.), activities of large financial funds based on forecasts, political factors, psychological factors and market volatility (irregularity in the investment market). These factors affect the currency exchange rate and the price movements on the Forex. Two basic methods are used to analyze foreign exchange markets. These methods are frequently used to inform trading decisions on the Forex. These are:
- Technical analysis
- Fundamental analysis
The fundamental analysis encompasses the use of external indicators like economic factors, political, social and psychological factors to predict price movements and trends in the Forex market.
On the other hand, technical analysis uses charts to identify price trends; these price charts are believed to have (already) taken into account the effects of external factors (such as economic, political and social factors) on prices. The implication of this is that there is no need to study these external effects separately. Another important belief of technical analysts is that the price has a trend and this trend enables you to predict and make profitable decisions. The information lead to the assumption made when using technical analysis – history repeats itself. The point is that human beings tend to react to situations in the same way they reacted when they came in contact with a similar situation in the past. All these assumptions are the bases used to analyze the Forex market and make decisions.
To trade online you need an online trading platform that includes automated online brokerage account services that enable you to buy and sell through the Internet. In other words, you don’t need a physical broker; you can get an online trading platform that will provide you with all the broker services you need to trade on the Forex. There are a number of reputable broker websites online that provide this service.
One of the most common platforms is the MetaTrader. MetaTrader is a friendly trading point front-end for user’s. The software offers technical analysis; charts and Expert Advisors that help user’s build up their trading strategy. This software is fully compatible with Forex automated trading robot. This automatic trading software is developed to simplify the complication that comes to trading on the Forex; most especially to reduce risk levels and human errors while trying to analyze the market. Automated trading involves the use of Expert Advisors.
Expert Advisor has written programs compatible with trading platform software and enables automated trading to take place without human intervention. The Advisor can notify the user’s of profitable prospects and also completing deals automatically on your behalf. It is important to note that you can use a demo account that does not involve real money investments to learn how the Forex works. When you are comfortable with this and you are ready to invest, you can go ahead and open a real account.
In summary, this article examined in layman’s terms, simple facts that new investors need to understand about the Forex trading. More precisely, this article pointed on the history of Forex, the level of risk involved, factors that influence foreign exchange rates and tools used for market analysis. We also delved into online Forex trading and what it entails.