BUSINESS - FOREXThe market is the place where traders buy and sell currencies. In general, the place where all transactions take place. Let's learn more about the forex market.
In general, the forex market, where the purchase and sale of currency takes place, is a program that must be downloaded and installed before you start playing.
There are many forex platforms (market program) on which the game takes place. The most famous of them: TeamWox, MetaTrader 4 and MetaTrader 5. All these platforms are different and good in their own way.
Currencies in the forex market are: rubles, euros, dollars, hryvnia and other currencies, in total, their number has about 150 different currencies.
In order to make a large profit from the operation of buying and selling volutes, you need to buy it cheaper and sell it at a higher price. Or sell more expensive and buy cheaper. And if you bought the currency for expensive and sold for cheap, then you will not have any profit, only one loss. Therefore, before making any transactions, you need to learn about the forex market as much as possible.
Some traders in the forex market use special programs that help them trade in the forex market, extracting more profit from it and avoiding losses. Such a program is called an assistant. With its help you will be able to avoid risky transactions, and make only those transactions that will bring you profit. In general, an assistant is a script (program) that sometimes even traders themselves write, thereby creating a strategy by which your assistant acts.
Forex historyForex (FOREX) - abbreviation from English. FOReign EXchange, which translates as "international currency exchange." The term Forex is commonly used to refer to the mutual exchange of freely convertible currencies, and not the entire set of currency exchange transactions. Forex operations by purpose can be trading, speculative, hedging, regulating (currency interventions by central banks).
In RuNet, the term Forex usually means exclusively speculative trading through commercial banks or dealing centers, which is conducted using leverage, that is, margin trading. This is described in more detail in the sections “Participants of the foreign exchange market” and “Forex as a means of making a profit”.
Forex historyWe owe innovation to the Jamaican monetary system, the principles of which were laid in March 1973 on the island of Jamaica with the participation of the 20 most developed states of the non-communist bloc. A little later, in 1975, French President Valerie Giscard d'Estaing and German Chancellor Helmut Schmidt (both former finance ministers) invited the heads of other leading Western states to gather in a narrow informal circle to talk face to face. The first G8 summit was held in 1975 in Rambouillet with the participation of the United States, Germany, Great Britain, France, Italy and Japan (in 1976 Canada joined the work of the club, and Russia in 1998). One of the main topics of discussion was the structural reform of the international monetary system.
The international currency market (FOREX) appeared on January 8, 1976, when at a meeting of the ministers of the IMF member countries in Kingston (Jamaica), a new agreement was adopted on the structure of the international monetary system, which had the form of amendments to the IMF charter. The system replaced the post-war Bretton Woods monetary system. From this point on, free floating rates became the only way to exchange currencies.
The new monetary system finally abandoned the principle of determining the purchasing power of money based on the value of their gold equivalent (gold standard). The money of the countries participating in the agreement ceased to have an official gold content. The exchange began to occur in the free market at free prices. This principle gave rise to the term freely convertible currency (SLE).
The formation of a floating rate system led to three significant results:
At present, the volume of daily trading on the FOREX market is, according to various estimates, from 2 to 4 trillion dollars. There are no exact data, as there is no requirement for mandatory registration and publication of all transactions in this market. A part of this volume is provided by margin trading. Regardless of the nature and objectives of transactions, such a large daily turnover is a guarantee of high liquidity of this market.
Currency Market ParticipantsForex is an international interbank market. Operations are conducted through a system of institutions: central banks, commercial banks, investment banks, brokers and dealers, pension funds, insurance companies, transnational corporations, etc. The volume of one contract with the real supply of currency on the second working day (spot market) is usually about $ 5 million or equivalent. The cost of one conversion payment is from 60 to 300 dollars. In addition, you will have to incur costs of up to $ 6,000 per month for an interbank information and trading terminal. Due to these conditions, no small amounts are converted in Forex. To do this, it is cheaper to contact financial intermediaries (bank or foreign exchange broker), who will convert for a certain percentage of the transaction amount. With a large number of clients and multidirectional requests, intermediaries do not always need to carry out real conversion through Forex. But they always get their commissions from clients. It is due to the fact that not all client applications get to Forex, intermediaries can offer customers commission fees, which are significantly lower than the cost of direct operations on Forex. At the same time, if we eliminate intermediaries, the cost of conversion for the end customer will inevitably increase!
Current currency quotes are used for a large number of transactions that do not necessarily have direct access to Forex. An example is the change in the exchange rate of a national currency by a state bank, which is forced to maintain the exchange rate ratios between foreign currencies in accordance with their proportions in Forex, even if the real domestic demand / supply does not correspond to the trends in Forex. For example, if there is an excess euro supply on the domestic market, but at the same time the price of the euro against the dollar increases on Forex, the central bank will also have to raise the price, rather than lower it under the pressure of the excess supply.
Another vivid example is the marginal speculative currency trading, which is focused on fixing current Forex quotes, but according to its conditions it passes without actual delivery. Almost all intermediaries in the foreign exchange market offer clients not only direct conversion services, but also speculative trading with leverage. In most cases, the commission for such operations is even lower than for direct conversion, since due to the mass character and short duration of transactions, the need to conclude real supply contracts arises even less often. Very often, commissions take the form of a spread - a fixed difference between the purchase price of a currency and the sale price at the same time. In most cases, a chain of several intermediaries is built between Forex and the speculator, each of which takes its own commission.
Margin transactions can lead (but not necessarily lead) to the emergence of real additional demand or supply in the foreign exchange market, especially in the short term. But they do not form a general trend in the movement of exchange rates.
Forex as a means of profitIn RuNet, the term Forex is usually called not the currency exchange system in general, but exclusively marginal speculative trading through commercial banks or dealing centers. At the same time, advertisements calling for “earning on Forex” usually do not indicate what exactly this is about. People are usually not warned that this activity is not "earning", that it is one of the types of business with its start-up capital and inevitable risks. Moreover, a business with a higher level of profitability is always more risky. The advertisement does not report that the use of leverage not only leads to an increase in the rate of increase in capital, but also to a multiple increase in the risk of loss. It is proposed to just see everything with your own eyes and try on training accounts with virtual money. Such accounts usually "live" 2-4 weeks. During this time, it is not always possible to observe all possible situations. The majority of beginners at the same time see only what they themselves want to see - the ease and speed of increase in funds. Failures are quickly forgotten: I'm an inexperienced newcomer, and the money is virtual - “I'm not losing a cow”. Successes inspire and are remembered: even the beginner managed to “get rich” so quickly, everything is so simple here that you can start making profit even tomorrow.
At the same time, we must not forget that any business always contains an opportunity to make a profit by chance. So that the profit was not occasional, but regularly and naturally, it requires an understanding of both the specifics of a particular type of business and economic laws in general. Only with the observance of these laws and restrictions, currency trading in terms of risk and return is comparable to any other speculative trading, including in the stock or commodity markets.
There are doubts about the “investment in the Forex market”. Forex is not a currency exchange or other official trading platform with clear rules and hours of operation. Tradable currencies (as opposed to stocks, bills, bonds) do not have independent returns, which would not be related to exchange rate fluctuations in the foreign exchange market itself. True, there is the possibility of receiving income from a positive swap. But the guaranteed yield at the level of 1-3 points per day (about 10-30 dollars with a contract worth 100,000) is incomparable with the risk of unprofitable currency movement of 100-200 points per day (about 1,000-2,000 dollars with a contract worth 100 ' 000).