How to Win in Forex Market, A Guide for Beginners: Forex – This term consists of foreign currency and exchange. And this exchange works as a mediator or a regulator for exchanging currencies of different countries for varied reasons like tourism, finance, transports etc.
Understanding the forex market
As currency exchange is the largest market where the capital of a country is most liquidated. An average person uses it with a motive to hedge against his upward-moving interest risks and to increase his portfolio.
Here in the forex market, a trader gets the opportunity to trade in currency pairs like USD/EUR as well as derivatives like bond, future, options, and cryptocurrencies etc.
Why we need forex markets?
There is a strong need for currency exchange because of globalization of trade markets. For example, if we want to buy crude oil from the US and we are living in India, then we have to pay the money to the US in their currency which is Dollar, but as in India, the currency is INR, so we have to exchange it in the equal value of Dollar.
How does the forex market work?
The forex market operates 24 hours and five and a half days a week. And the beauty of this market is that it is not centralized, i.e. all the work and transactions are made over-the-counter via computers. Some of the leading forex markets where currency transactions are made are located in London, New York, Tokyo, Zurich and Sydney etc.
There is no centralized body for currency exchange physically; hence it becomes handy for traders to invest in thousands of forex instruments including oil, primary sector products, oil, and metals also.
How is trading done in forex markets?
There are three major ways that are used by investment and commercial banks, corporate institutions and individuals to do trading. That is trading in the spot or cash market, trading in forwarding markets and future markets.
The spot market is the underlying asset for trading in forwarding and futures market. In all of these, the futures market is most popular among investor as it hedges their anticipated risks in currency exchange risks to a specific date in coming future because here the prize money is already fixed for a specific entity which is unaffected due to any future change in the currency value.
How forex markets are changing in 2020?
Individuals who were keen to invest in future markets due to its quality of retaining an investor for more time are now shifting more towards spot market because short term gains are more in spot market compared to future and forward markets.
But when we talk about the forward and futures markets, these are still the primary choice for the corporates and long-term investors.
How trades are placed in forex markets
placing the trade is a sophisticated process that involves certain strategies to be followed based on market scenarios and prospects. These strategies include- day trading, scalping, swing trading and investing for a long time.