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How Forex works - Key differences

Wednesday, 9 August 2017 01:17
How Forex works - Key differences

Forex is the world currency market. This is the only trading platform that doesn’t have a physical location, but shows a huge daily currency turnover. All the operations on forex are made on the Internet, and this platform works 24 hours a day, 7 days a week.

Structure of the Exchange

The world market of the currency is divided into five segments:

  • Spot takes 48% of the Forex;
  • Swaps take 39%;
  • Forwards have 7%;
  • Options got 5%;
  • Futures have 1%.

Spot Forex is used by most traders. This segment is responsible for the exchange of the dollar. On the Spot site, the dollar is exchanged for the world's major currencies: the euro, the Japanese yen, the British pound sterling, the Swiss franc, Canadian, New Zealand and Australian dollars.

The US dollar is the most popular and liquid currency on the exchange. This is the main reserve currency in the world, which means that USD is in demand for everyone. "Green Presidents" are used in 40% of transactions on the market.

It should be noted that, recently on the European market, there was a tendency to trade "cross rates", that is – pairs without the participation of the US dollar, but this didn’t affect the popularity of USD.

Daily Fluctuations in the Exchange Rate

A very important feature of the market is that it allows you to earn on fluctuations of the exchange rate - whether it’s raising or falling. Let's say you sell dollars and buy francs at the same time. You expect that the dollar will continue to fall. You get real profits, if the US currency is really going to be cheaper, and the franc is getting more expensive. As a result, you will buy francs, which will cost more dollars than before.

The most important thing for traders is to monitor the change in quotations during the day. On average, the price can change by 80-150 points for one trading day. For example, if the rate increases by 100 points, and you opened a deal in the right direction before it, you will earn $1000. If you made a mistake in your forecasts and did not close the order on time, you will lose money.

Opportunity to Earn

To trade on currency flows successfully, practice is necessary. No novice trader can immediately find where the course will go in an hour or a day. It’s necessary to make a technical and fundamental analysis, build a trading strategy, and test various financial instruments. The first type of forecast is based on the study of the graph. In this case, traders use advisors, indicators and other sale assistants. The fundamental method involves reviewing world news and comparing key events with the price movements. This helps to react to the upcoming trend reversal in time, and open a deal in the right direction.

In conclusion, we want to note that Forex is the most liquid market in the world, which means that there will be supply to any demand and vice versa. On this site you can really earn well, the main thing is to practice and do everything wisely.

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Frederica Oliver
Frederica Oliver

Blogger, trader. I create charts based on my own technical analysis and financial market overwiev . I also conduct market fundamental analysis