Chapter 1. Introduction to Forex
Prior to the 1970s, the price of the currency of any country in the world is determined by the gold reserves of the country - in the world acted gold exchange standard. Each had its own currency equivalent, expressed in ounces of gold. Soon everything changed, from the gold-exchange standard abandoned, and were introduced floating exchange rates - the price of the currency became determined solely by its supply and demand. This is how the international currency market - Forex.
Forex unit of currency of one country is sold for a certain number of units of the currency of another country. Since quite difficult to imagine how the money can be sold for money, you can think about the currency as a security which gives you the right to share in the economy of the corresponding country. For this reason, the health of the economy is determined by the stability of its currency. So by trading Forex, we are trading particles of the world's economies.
What is unique Forex? Imagine a market where you can at any moment to buy or sell everything you want. You have brought to market a product and at the same moment have found a buyer for a mutually beneficial price. This - the characteristics of an ideal of highly liquid market. Liquidity means exactly the opportunity at any time to sell or buy a commodity at a mutually beneficial price, or, as they say in books, exchange the goods for money, and the money for the goods. What do you need for a perfect market? Firstly, the absence of a monopoly and fair competition.Secondly, a large number of participants. Third, work round the clock. This - the basic requirements for an ideal market, if desired, can count a dozen, to withdraw from the system and to protect the hundreds of equations on the topic doctoral thesis. But we will not deviate from the topic, at this point it is only important to understand that Forex - the most highly liquid market in the world!
Forex turnover is more than 3 trillion (!) Dollars a day. Participant in Forex can be anyone. All you need to do - it's a definite value of the initial capital (we'll talk more later) and Internet access. With so many participants, none of them (even the central banks of the advanced countries of the world) can not for a long time alone to influence the supply and demand of a particular currency. All processes affecting the supply and demand - is a natural process of life of national economies. In these processes, there are both laws and surprises. Learn to understand and respond to changes in these processes - an important part of Forex trading, known as fundamental analysis. There is technical analysis, but this is all we will talk later, and now do not get ahead of ourselves.
An interesting fact is that until the late 1990s, Forex trading only large financial institutions and banks. To trade on the required capital in the tens of millions of dollars the United States, it is on such sums to conclude contracts of purchase / sale agreement between its members. With the development of the Internet has changed everything, there were stock brokers, providing services to individuals.Using the benefits of margin trading, individuals possessing a capital of several thousand dollars US, may enter into contracts of purchase / sale of currency in thehundreds of thousands of dollars the United States, exclusively at the risk of their capital. The principle of margin trading is the basis of Forex trading individuals and will be considered in detail later.
In Forex there is no physical location or central exchange office. Forex trading platform - the whole world! Forex trading does not stop for a minute. The calendar day it begins in the Far East in Wellington (New Zealand), passing the time zones - in Sydney, Tokyo, Hong Kong, Singapore, Moscow, Frankfurt, Zurich, London and ending the day in New York and Los Angeles. Of these cities the greatest value in relation to Forex are Tokyo (Japan), London (UK) and New York (USA). Depending on the time of day, one currency can trade in Forex more active than the other - this is due to running time of major financial centers of the respective countries.
We summarize the introductory part. The international currency market Forex has several advantages compared to other markets, such as stock (equity markets traded shares) - No need to stay awake the night in the Far East of Russia, waiting for the closing of the stock market in Moscow.Forex operates around the clock and is the most highly liquid market in the world. The spread of the Internet has led to an exchange intermediary offering individuals the opportunity to work and earn money on Forex. It so happened that the competition among such exchange intermediaries on the Internet is great, leading to a rather lucrative offers forex trading for individuals. In the introductory part we deliberately used many technical terms and concepts used in relation to Forex trading, to avoid overloading the reader a lot of information at once. In the following sections of the site picture Forex trading is becoming more and more clear.
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