What is the Forex Market?
To know about, Fore Trading First, we will know about the Foreign Exchange Market is Where Currencies Are Traded. Currencies are Important because they allow us to purchase Goods and Services locally and across borders. International Currencies need to be exchanged to conduct foreign trade and business.
A French tourist in Egypt can’t pay in euros to see the pyramids because it’s not the locally accepted currency. the tourist has to exchange the euros for the local currency, in this case, the Egyptian pound, at the current exchange rate.
The same thing goes for buying and selling if you are living in the united states and want to buy cheese from France, then either you or the company from which you buy the cheese has to pay the French for the cheese in euros (EUR). this means that the U.S. importer would have to exchange the equivalent value of U.S. dollars (USD) into euros.
Here are some important tips for forex market beginners. the forex market is a very huge platform for traders. the first thing in the forex market we should want to know is that 90% of People who trade in the forex market lose their money. we know them as retail forex traders who loses their money in forex trading.it means only 10% of people in forex trader gain profit.
if you want to come rest of 10% people. then you have to become a professional, disciplined, who want to do things wisely, who have all the quality forex trading profit only for those people.
This is not so easy the more money is in it. that much more risk in it. and also a lot of hard work.
This is OTC Market (Over The Counter Market). there is no legal authority over it. what if someone cheated you. where will you do, to whom will your complaint. if that person belongs to be from India then you can do a police complaint. if your broker fund manager, Portfolio manager, tips provider belongs to out of India then what would you do. he is out of the Indian Govt. RBI and CBI are not able to catch him. even in his country, nothing can happen to him. this is an Unregulated Market.
What Is Meant by Unregulated Market. is all people wrong? not all people wrong. and not all good.
That is to say because it is an unregulated market. that is why it is not safe you have to be more careful while trading in forex.
In the forex trading market, you have to need conscious. not to become greedy. all I want to say is that you have to choose your broker wisely.
A Brief History of Forex
In its most basic sense, the forex market has been around for centuries. people have always exchanged or bartered goods and currencies to purchase goods and services. however, the forex market, as we understand it today, is a relatively modern invention.
Commercial and investment Banks conduct most of the trading in forex markets on behalf of their clients, but there are also speculative opportunities for trading one currency against another for professional and individual investors.
There are two distinct features to currencies as an asset classes
- you can earn the interest rate diffrencial between two currencies.
- you can profit from changes in the exchange rate.
An investor can profit from diffrence between two interest rates in two different economies by buying the currency with the higher interest rate and shorting the currency with the lower interest rate. prior to the 2008 financial crisis, it was very common to short the Japanese yen (jpy) and buy British because the interest rate differential was very large. this strategy is sometimes referred to as a carry trade.
Also Read: What is Finance? Types of Finance