FxBrokerReviews.org – The foreign exchange market or the forex market is a global platform to trade and exchange foreign currencies. Due to the easy access and worldwide reach the international forex trading market is the most liquid and active market with an approximate daily trading value of $6.6 billion as of 2019.
In the forex market, the trade activity can take place between people who work for international banks, multi-national corporations, fund managers or even between common people who want to invest in forex marketing trading.
Trading currencies can be a little risky, especially for those who are new to the market. The prices of the currency are constantly changing and it is difficult for a novice to predict the market, therefore comes the role of a foreign exchange platforms or a forex broker. They help you analyse the market and simplify the trade process.
There is a lot more to know about the forex market. Read on to learn about forex international trading, the best forex trading platforms and more!
What do you mean by the term ‘Forex’?
Forex is the short form used for Foreign Exchange. It means the exchange of one currency for another. In simpler terms, one can trade or change the US dollar for the euro. Forex is mostly used by multi-national corporations, international banks, fund managers or even common people to earn some profit through international forex trading.
The trade of forex takes place on the foreign exchange market which opens 24 hours a day and 5 days a week. The international forex trading times open from 5 p.m. EST on Sunday until 4 p.m. EST on Friday.
What is international forex trading?
Now that you know what forex means, it is quite easy to understand the meaning of Forex trading.
Forex trading can be explained as the transfer of currency between a network of widespread buyers and sellers, at an agreed price. In forex marketing trading, the traders try to earn profits by speculating the price of the currencies that they are willing to trade.
The price of the currency is influenced by various factors like trade flow, politics, economic affairs or any geo-political situations that may affect the demand and supply of the forex.
Why does the forex market open 24 hours a day?
The market is open 24 hours a day in different parts of the world. The forex market is open from 5 p.m. EST on Sunday until 4 p.m. EST on Friday. The forex market does not only include a single market but the exchange takes place between the best forex trading platforms that are spread all across the world. The international forex trading times depend on when the forex market opens in different time zones. While London and New York are the busiest time zones in the market the most commonly accepted ones are:
- London 3 am to 12 noon EST
- New York 8 am to 5 pm EST
- Tokyo 7 pm to 4 am EST
- Sydney 5 pm to 2 am EST
The market is first opened with the Australasia area, followed by Europe, and then North America. As the market of one region closes based on the clock, the market of the other area opens, therefore the forex market is always on the clock.
Understanding how international forex trading works
Trading in the forex market is always done through buying and selling of two currencies, or in a currency pair. The currency pair consists of two parts: the base currency and the quote currency. The base currency is the first currency listed in the currency pair and the latter is the quote currency. The price of each pair is determined on the basis of how much of the quote currency it costs to buy one unit of the base currency.
To understand currency pairs better Forex Broker Reviews has provided a detailed description of the common pairs available in the forex market. Each currency is given a three-letter code to help them identify better.
Take a look at some of the common currency codes used in forex marketing trading.
Country Name & Symbol
- United States USD
- EuroZone EUR
- Switzerland CHF
- Australia AUD
- Great Britain GBP
- Japan JPY
- New Zealand NZD
- Canada CAD
There are a total of seven currency pairs also known as the majors that carry out most of the forex trading:
What are the different types of forex markets?
The forex market is the place where all the exchange happens through various foreign exchange platforms. The forex market does not have any physical place, instead, it is just a network of connections spread worldwide through computers and devices.
You can take part in forex trade by investing in three different markets:
- Spot market
- Futures market and
- Forward market
Let us get a deep understanding of the scope and purpose of these markets:
1. Spot Markets
Often when people mention the forex market they refer to spot markets. They are the largest markets in international forex trading. The assets of the futures and forward market also are based on the spot market.
The spot market is the place where the exchange of the currency pairs takes place, based on the demand and supply of the forex. The deal finalized between the buyer and seller is known as a spot deal.
The transaction that takes place is bilateral. Meaning one trader will provide the agreed amount of currency to the person on the other end of the deal and will receive an amount of another currency. The currency will be received at the rate value of the exchange rate. Once the deal is closed the payment or settlement is done only in cash.
All transactions in the spot market take place in real time i.e the present but it roughly takes 2-3 days to process the transaction.
2. Future Markets
A futures market is a place of exchange where buyers and sellers trade in commodities and assets that they will receive on a future date, decided mutually by both parties. The futures market is regulated and protected by the Commodity Futures Trading Commission (CFTC).
In simpler terms, it is a financial exchange where traders exchange futures contracts that are set at a pre-determined rate and date for stock indices, metals, agricultural products, currency pairs, and interest rates.
Trading in futures markets protects the traders from losing money even if the price of the commodity fluctuates. The buyer and seller enter into a mutually signed contract for the trade. There are many foreign exchange platforms that help traders to invest in the futures market.
3. Forward Market
Forward markets are an over-the-counter marketplace that
facilitates the exchange of forward contracts that fix the price of an asset or financial instrument.
The pricing of the contracts is based on the difference in interest rates between the two currencies that are being traded.
The Forward contracts are different from futures because they can be customized based on the date of maturity and size of the offer. Whereas future contracts can not be customized.
These markets like the futures offer protection to the traders against the risk of fluctuating prices. The currencies that are mostly traded in the forward market are the same as the ones in the spot market namely: EUR/USD, GBP/USD and USD/JPY.
What are the key terminologies used in the forex market?
- Ask: An ask is similar to an offer. It is the price at which you decide to buy a currency pair. It can also be said to be the buy price.
- Bid: Bid or simply the sell price, is the price at which you agree or are willing to sell your currency. The bid is usually lower than the Ask price.
- Spread: The spread is the difference between the bid price and the Ask price. Foreign trading platforms earn their money through spreads, instead of charging commissions.
- Pip: Pip means percentage in point or price interest point. It is the smallest possible change in the price within a currency pair.
- Lot or lot size: Currencies on the forex market are traded in sizes known as lots. There are four common lot sizes standard, mini, micro, and nano. Lot size has a major impact on your trade and profits. The larger the lot size the larger the profit.
- Margin: the amount of money that a trader puts aside for a deposit known as margin. A margin amount helps the trader to have a backup and remain solvent in case the trade does not go in the way planned.
- Leverage: to trade a huge lot, if a trader doesnt have the money they can borrow the money. This borrowing of money is known as leverage. It is also used by traders to boost their positions in the forex market.
- Contract of difference: A contract for difference (CFD) allows traders to speculate on the movements of the price of the currencies without actually owning any underlying assets.
- Exchange rate: the exchange rate is the rate at which the traders exchange currencies on the international forex trading market.
- Bear and Bull Market: Bear market is when the market is on the decline. It is when the traders predict that there is going to be short selling in the market. Bull Market is when the market is on an increase. The traders in the bull market increase their long trading.
How to start trading in the forex market?
It is always recommended to trade in the forex market through a forex trading platform. There are various brokers online or forex trading apps that help to invest and take the right trade decisions. If you have just decided to start trading then our team at Forex Broker review has created a step-by-step guide to help you start trading in the right way!
1. Research and educate yourself
The most important step before you actually start trading is to conduct thorough research about the forex market and international forex trading. Learn about the market and the type of market you want to invest in. Become aware of the key terms and trends used in the forex market. You can even register yourself with various online courses that teach you about the foreign exchange market.
2. Find a broker
Today there are many forex trading apps and platforms that offer assistance in trading. Do not select the first broker you come across. A good broker is a difference between incurring profits and losing money in forex trading. Select only the best forex trading platform that suits your trading needs.
3. Set up your trading account
Once you have found a suitable broker, it is time to set up a trading account. As a beginner, it is advised to start with a micro forex trading account with low capital requirements. It will help you help to adjust trading and determine your trading style. You can pay the deposit account using various payment modes accepted by the broker.
4. Start trading
After completing the steps mentioned above, you now have a funded forex account and are ready to trade. Before you start buying and selling currencies it is good to develop a trading strategy that will help you cope with the volatile market. Remember, trading in the forex market comes with its own potential risks, but a high-leverage environment also increases the chances of rewards, despite the risks.
What are some of the best forex trading apps and platforms to start trading?
Best forex trading platforms
- CMC Markets
- Saxo Captial Markets
Best forex trading apps
- axoTraderGO mobile app
- City Index mobile
- OANDA fxTrade app
- IG Trading app
- AVA Trade
- E-toro open book
Read detailed reviews of these international forex trading platforms and more on Forex broker reviews.
While trading seems like a complicated process, you just need to educate yourself well and move step-wise before you invest money anywhere. If you are a beginner then it is advised to start with a demo account and a micro lot that will help to understand the trading patterns. There is always risk involved in the forex market, but high risks bring a high possibility of rewards.