Forex (Foreign Exchange market) – the world's largest financial market, where different currencies are exchanged against each other. Daily transaction volumes of the Forex market are, according to our estimates, as high as 3-4 trillion USD. Compare this to about 25 billion a day volume of the New York Stock Exchange.
Among all financial markets, Forex is the easiest to access for beginners and retail traders with relatively modest money to spare.
The major participants of the Forex market are commercial and central banks, large corporations and hedge-funds. However, you do not need to have millions or thousands of dollars to start! Due to leverage and marginal trading, you can start trading with €250 or €500 and enjoy the same trading conditions as the large market players. There are even Micro and Mini accounts that let you trade with as little as €1.
Unlike stock futures market, Forex is does not have a central location, where trading normally takes place. Banks and other market participants are connected to each other via electronic communications networks (ECNs). Forex trading continues 24 hours aday, 5 days a week from Monday to Friday. This decentralized structure allows traders to buy and sell currencies without extra fees and commissions. It also provides access to trading anytime and from anywhere in the world.
High liquidity and best prices. In Forex there are always traders who are willing to buy or sell. The market never sleeps. An ECN Broker offers its clients the best quotes from major banks, other ECNs and liquidity providers. The Broker actually profits from providing the best quotes and the tightest spreads.
Access to trading 24/5 from anywhere. The market trades 24 hours a day, 5 days a week from Monday to Friday, and your broker offers you support 24 hours a day. You can choose when to trade – the European, US and the Asian trading sessions follow each other. When trading sessions in different time zones overlap, the available liquidity in Forex reaches its maximum.
You can trade with as little as €250! Starting deposits in Forex are considerably lower than in other financial markets. Leveraged (or marginal) trading used in Forex lets you operate funds many times as large as your margin deposit.
And the broker is interested in your profits. In the ECN model, you trade with other market participants not against your broker. To execute your order, the ECN Aggregator will find a matching opposite order (same price and available volume) from another market participant. The broker charges a small commission for transferring your order to the ECN and finding a match for it. With this business model, the broker is not trading against you and does not profit when you lose. On the contrary, the broker receives more commission when you increase your trade volumes.
In Forex, there is always a chance to earn. Stock markets can crash and securities may lose their value but when one currency is depreciating, the other will be gaining value and you can earn on that as well. Market Analytics are easy to follow. There are only 4 major currency pairs in Forex. You can choose just one currency pair or several pairs to focus on. Monitoring news and market analytics for 4 currency pairs is easier than struggling to keep an eye on thousands of stocks.
Education and Training for Beginners. Broker provides you with demo-accounts, training courses and workshops, video tutorials, news, charts and market analytics so that you can practice your trading skills.
Automated trading. You do not have to spend long hours in front of your computer studying charts and following all the price movements. With automatic indicators and signals you will be notified immediately of any important events or trend reversals. You can also take advantage of expert advisors, that are based on your own or somebody else's proven trading strategy. An Expert Advisor trades automatically without your participation.
The Personal Computer and the Internet have brought more retail traders to the market than never. Online trading expanded globally, and Forex brokers spotted the opportunity by offering leveraged access to the largest market in the world – the foreign exchange market.
A Forex broker, therefore, is a link between the market and the trader. Via leverage, it gives traders the possibility to speculate on the currency market moves.
Nowadays, a Forex broker is more than just that – a broker that intermediates access to the currency market. Its role expanded as new markets appeared and grew in popularity.
From the same trading account, a retail trader can be active on the gold, oil, or even the cryptocurrency markets. It increases the number of strategies to use from the same account and provides an opportunity to diversify the trading account against correlated market moves better.
Depending on how the Forex trading broker’s activity is organized, different types of trading accounts exist. And, with that, different trading conditions.
For instance, some brokers are organized as market makers. Also called dealing desks, they mirror the actual market and offer traders similar conditions via the trading platform. Effectively, the trader deals with the broker, without the positions to be transferred to the market. In this case, most likely, the broker offers a fixed spreads account and charges a commission too.
Some other brokers route all or only some of their client's orders to the liquidity providers they work with. In the case all the trades go thought the liquidity providers, the brokerage house operates a no-dealing desk business. If only some of the trades go to liquidity providers, and the rest are kept in-house, the broker's model is a hybrid one – a combination between dealing and no-dealing desks.
Obviously, the more liquidity providers a broker works with, the better the trading conditions it can offer – low spreads, lower commissions, multiple types of trading accounts.The trading accounts differ based on the exchange broker’s business model. No-dealing desks, for instance, use either the Electronic Communication Network (ECN) technology or the Straight-Through Processing (STP) model. In this case, the broker deals variable spreads that change with the market conditions – they tighten when there's little or no market volatility and widen when important economic news hits the wires or when there's little or no liquidity (e.g. during position roll-over from one day to another). The significant advantage here is that the broker guarantees a filling when there's a market and doesn’t send re-quotes for a trade “at the market”.
All Forex brokers have an online presence and advertise their services both to current customers and to prospective ones. To enroll with a broker, all one must do is to follow a few simple steps:
Fill in personal details.
Answer a few questions regarding trading experience.
Fund the trading account.
That's it. It takes sometimes from a few hours to a couple of days to be up and running – it depends mostly on the ID verification process and the funding method used to deposit funds.
The main income source for a Forex broker is the spread between the bid and the ask price. Each currency pair or financial instrument provided by the brokerage house has two prices – bid and ask. Buying always takes place from the ask price, while selling from the bid.
In other words, assuming you bought the EURUSD pair at 1.1030 and the quotation rose to 1.1058. The difference between the two prices is 28 pips. When you bought, you used the ask price on the pair. If deciding to close the trade, you must square it. To do that, when closing it, the trade broker definition means selling from the bid price.
The spread differs from a currency pair to another and from financial product to financial product. For instance, the tightest spread is typically on the EURUSD, the most popular currency pair, while the cross pairs (i.e., the ones that do not have the USD in their compose) have a wider spread.
Besides spreads, brokers also charge commissions that vary based on the volume of each trade and the type of trading account. Moreover, some withdrawal methods are subject to fees, but that depends from brokerage house to brokerage house.
Consider a national currency as a security, like stocks, commodities or precious metals. The recipe for success is to buy it at the cheapest price and then sell at a higher price. Or the other way round – sell at a higher price and then buy cheaper. Whether a currency is increasing or declining in value, there is always a way for you to make money in Forex! Knowing the right time to buy or sell will do the trick. This is where market analytics, indicators, signals and automated trading systems come in handy.
Let's consider an example:
Let's assume the market forecast the Euro is going to appreciate against US Dollar (bullish trend for EUR/USD). You decide to buy Euros with USD (buy order on EUR/USD). After some time you decide to sell the Euro at a higher price (close the open EUR/USD position). Your profit is the difference between the opening and the closing prices.
How much money do you need to start trading Forex?
In order to attract traders, many forex brokers, including itcfx.co, offer to start trading without a starting deposit. You can start trading with us without money from €10, which are credited to you as a welcome bonus to a newly opened active STP account after passing the verification.
Learn the basics of currency trading?
Remember that Forex trading involves high risk. There are limitless opportunities to make profit and your potential gain is very high. However,the risk of loss is high as well. If you make an independent and informed choice to become a Forex trader, you should always follow the basic risk management rules. It's not an easy task but it's very important whether you trade with a few hundred dollars or operate millions. Taking a good Forex education course may be the best investment you'd ever make in your trading career. Take your time to study the basics of trading and practice it in a demo account before you start trading with real money. Always be sure to follow the rule - never trade with money that you cannot afford to lose.
What is the Forex economic calendar, and how to use it in trading?
The Forex and stock market economic calendar summarizes news and other important publications to be published during trading sessions. These are the fundamental data that affect the prices of small and large markets. This is why the economic news calendar is one of the first-tier tools for real time analysis if you decide to trade foreign exchange.
How to use the economic calendar?
In addition to its unique importance for fundamental analysis and forecasting, as mentioned above, the Forex live economic calendar serves as an indicator for news trading in the Forex market. If you are engaged in exchange trading and seek advice regarding opening positions, the calendar can serve as a reliable source of information. For this purpose, there is a well-tried algorithm for using the Forex calendar, suitable for all investors.
1. At the beginning of a new trading day (or the day before), a trader opens the economic calendar and notes the important macroeconomic news. Of paramount importance is the news marked in the calendar with three exclamation points.
2. In case you are experienced enough, they perform the analysis of previous macroeconomic data, as well as the reaction of the main market players and how it reflects in the dynamics of asset quotes. It is also important to get acquainted with the opinion of market experts and more experienced traders, get general market commentary and advice from independent experts on the Internet, including itcfx.co blog.
3. Immediately after the news release and its evaluation in the economic calendar, the trader reconciles the released data with the forecast, and makes a decision to invest money according to the conclusions made. Please note that you need to carefully consider your investment objectives under any circumstances.
In case the news is positive, i.e. its value is higher than the forecast median, a decision can be made to buy the currency, the quotes of which are most sensitive to the macroeconomic news content. In case the news is negative, i.e. its value is lower than the forecast median a decision can be made to sell the currency, the quotes of which are most sensitive to the macroeconomic news content.
However, news trading is not the only way to use the economic calendar. Very often, published news is of great importance not only for Forex trading, but also for the world economy. There are events like changes in the level of discount rates made by central banks (regulators), or the release of statistics on inflation, the number of employees, etc. Such data, if published, is able to channel the quotes of Forex market assets, stock and commodity markets into long-term trends. Such manifestations arise directly or indirectly, and fall into the domain of interest of investors who can use the economic calendar for long-term forecasting and investments.
What to pay attention to when using the Forex economic calendar?
The following data may be crucial when you explore the economic calendar: The time of publication according to the trader's location.
Origin of the news (in which country the event occurred and what is the source of publication). For example, if USD/CAD is one of the pairs you trade, you should pay attention to the Canadian and US economic statistics. The importance of the news, namely, the impact on the relevant asset. If the impact is low, the price of the relevant currency is likely to be unaffected. On the other hand, if important news is published, there will be high volatility in the financial asset.
The nature and wording of the news will make it possible to judge the nature of this event, be it Mario Draghi speech or the U.S. unemployment statistics.
Results and forecast statistics: historical data will allow you to assess the evolution of events and compare them with the market situation at the moment, and maybe even take a different perspective on the initial investment.
Note that reliance on such information should be somewhat limited and not be the only source of decision-making. Risks associated with foreign trading can never be reduced to zero, no matter what analysis method you use. Always keep in mind the amount you can afford to lose if you decide to open a trade according to news, and that Forex economic calendar contents do not constitute investment advice.
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