The world FX market or Currency exchange market is a global decentralised market for currency trading. This market has all the different parts of normal trading like buying, selling or exchange of currencies at live rates. This is the largest exchange market in the world. If you are travelling to the US from Australia you need USD dollars to make transactions in the USA, so you exchange your Australian dollars for US dollars, this is a perfect example of currency exchange. The forex exchange has a long history from the ancient times of the roman empire to the Medici family in Italy and still surviving till the modern age. The FX underwent the most changes after the second world war from the 1940s till the 1980s with multiple market crashes and drastic changes in international policy. The modern FX exchange is a volatile market with an enormous number of participants around the world.
What is Forex and how does it work?
The FX market is what dictates the value of a currency at a given point in time. Like mentioned earlier the common use of liquidity in forex trading by non-market traders is in the form of currency exchange for tourism or travel. The market, however, is controlled by huge companies and a network of banks around the world, the major FX trading centres are spread through different time zones, because of this the FX market is a 24 hour functioning market. The major trading centres are in London, New York, Sydney and Tokyo.
The different types of markets
There are three different types of currency markets those are:
Spot Forex market: this is the physical exchange of the currency pair on the spot during the trade, this is the simple currency exchange most people go through.
Forward FX market: contracts are set in place to buy or sell a fixed amount of currency at a preset price, which is to be settled at a set date in the future or multiple dates over time, this has no legal binding has is exposed to a lot of risks.
Future Forex market: this entails the same as Forward contracts but has a binding legal tender which makes it less risky.
Most FX traders make future predictions on exchange rates taking advantage of the market movements in hope of making a considerable profit.
Technology and FX trading
Forex trading is now a complete online marketplace, this is allowing single participants to actively participate and have a chance at making a profit. Online applications and websites have active trading and live exchange rates helping users have a real chance in the exchange market. For beginners, most applications and websites have an option of virtual trading which gives them an option to test their mettle before diving into real trading.
Advantages of the Currency market
Market Hours: the 24-hour market is one of the biggest pros of the Forex market, the hours give all the people a chance at the market. The different time zone trading markets create the 24-hour world market.
High liquidity: this is an advantage created by the unique market hours of FX. because of the 24-hour availability there are always people on the market buying and selling creating a highly liquid market worth over 5 trillion.
Volatility: Due to the high liquidity there are billions of dollars worth of transactions happening all the time, this causes the price movements of some of the currencies highly volatile. Giving traders a better chance at reaping higher profits.
Easy access tools: the different websites and applications around the world give fast and easy access to traders making the whole process hassle-free for market participants.
Ways to stop losing money in fx
Do your research – before going live and just jumping into volatile trading, study the trends and analyse the data the internet gives and act according to what you find. Going in blind and investing in the wrong trade is a fatal mistake most traders do because of overconfidence.
Put practice accounts to good use – using practice accounts don’t make you a novice, consistently practising on these accounts help you get a better understanding of the order-entry techniques and help you become a better trader on the whole.
Don’t abuse charts – most applications give you analysis tools, do not overuse them with multiple indicators and other tools. Keeping them to the minimum gives the most accurate indications and helps you avoid unnecessary errors.
Start small – do not over commit and risk a lot of money while going live, keep it to a minimum and safe.
Know your rules – properly understand and follow different rules of the market and your local government when it comes to FX.
Treat trading like a business- Don’t get emotional and trigger-happy when it comes to trading, keep a cool head and think about what you are doing, without this it just becomes gambling.