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acquaintance with the foreign exchange market
"What is Forex Market"?
We greet you! We strive to make Forex trading accessible to everyone, and this tutorial will help you with that. The first lesson is introductory, it will give you a basic understanding of what the Forex market is.
What is the Forex market?
How is a currency pair built?
How to use market movements to open a position?
What is the FOREX market?
FOREX is an abbreviation for foreign exchange, meaning foreign exchange. Forex is a financial market where various financial assets are traded, mainly currencies. Also on this market there is an opportunity to trade stocks and commodities, but more on that in the second lesson.
Forex is a decentralized market, trading takes place here quickly, and not on any specific exchange, but in turn, on different exchanges around the world. Thanks to this, market transactions take place instantly, with minimal commissions.
Trading in the foreign exchange market is speculating on price changes by buying one currency and selling another. For example, you bought $ 100 at the rate of 60 ₽ for $ 1. Returning to the exchanger after 3 days, you saw the rate of 70 rubles per dollar. As a result, you sold dollars to the bank and received a profit of 1,000 rubles.
Forex is the largest financial market in the world
Forex is the largest financial market in the world, there is no larger one. The daily turnover of this market is estimated at more than 6 trillion. $. This means that the prices of the currency are constantly fluctuating in value, relative to each other, creating numerous trading opportunities for investors that they can take advantage of.
Due to the high turnover in the market, currencies are constantly becoming more expensive and cheaper, relative to each other. These changes create opportunities for earning.
An example of trading in the foreign exchange market
You may not have even thought about it, but you have probably already traded in the foreign exchange market at least once in your life. Let's say you are planning a vacation in the United States and you need to exchange your rubles (RUB) for US dollars (USD). On Monday you go to the currency exchange office and see that the USD / RUB exchange rate is 60 ₽. This means that for 6,000 rubles that you exchange, you will receive $ 100. You spend 6,000 ₽ to get $ 100.
However, when you come back a few weeks later, you notice that the last USD / RUB exchange rate is now 80 ₽, and your $ 100 has risen in price by 30%. Now, having exchanged your dollars back for rubles, you will receive not 6,000 rubles, but 8,000 rubles. At the same time, if you knew that you need to wait for the rise in the value of the dollar against the ruble, you could get a more significant profit.
Forex Trading Basics
Currency exchange rates are constantly changing, depending on various economic and political factors. Forex traders seek to profit from these fluctuations by speculating on whether prices will rise or fall.
All currencies are traded (quoted) in pairs or quotes. A quote is the value of one currency expressed in the value of another currency. For example, USD / RUB = 70.00, which means that 1 dollar is worth 70 rubles. This is how absolutely all quotes are built.
Each currency can rise or fall in price. Since there are two currencies in each pair, you can earn: either on the growth of the first currency, or on the growth of the second
Examples of currency quotes
Let's look at a few examples of currency quotes:
- USD / RUB
If you think that the value of USD will rise in relation to RUB, then you open a long position or "buy" this currency. If you believe that the value of USD will fall to RUB, then you open a short position or "sell" this currency.
- USD / JPY
You predicted that the US dollar will strengthen against the JPY (Japanese yen). You can open a long position or buy the USD / JPY currency pair. You can also open a short position - sell, if you decide that the JPY will fall against the USD.
Such price fluctuations occur on Forex literally every second, creating opportunities for profit.