Tuesday, February 7, 2023

Forex: How currency trading works

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Forex functions as a system of interbank settlements, in which banks, international trading companies and all those who have a need to exchange one currency for any other participate. This market is open 24 hours a day, five days a week, and is only closed on weekends and certain public holidays.

Forex trading is available to traders with a small amount of funds and does not require long-term training. FIBO Group will help you take your first steps in the financial markets without the risk of losing your investment. Start by registering a free demo account and installing the MetaTrader 4 trading platform.

How to Earn on Forex?

The supply and demand of currency in the over-the-counter Forex market determines the price that suits both the seller and the buyer. Given the fact that hundreds of billions of dollars, euros and other currencies are circulating on Forex, and hundreds of thousands of buyers and sellers participate in the auction, demand, supply, and transaction prices are constantly changing.

Having bought (actually exchanged) the currency at one price, after a short period of time it can be sold (exchanged back) at another higher price. The difference between the purchase price and the sale price becomes the currency trader’s profit.

For example: The exchange rate of the euro against the dollar is 1.12 dollars for one euro. Having bought 100 euros for 112 dollars, the trader sells them, let’s say at the rate of 1.15 dollars for one euro and receives 3 dollars of profit. It would seem that 3 dollars is not much, but if you buy not 100 euros, but 100,000, then the profit will increase 1000 times. In addition, rates change very quickly and the purchase – sale can be made in just a few minutes, several times a day. As a rule, during the day, the changes are not so large and are not tenths, but hundredths and ten thousandths of a dollar.

The Choice of a Broker and the Risks of a Trader

When choosing a forex broker, you must first evaluate his experience and length of service in the market. Exness has been providing services in the Forex market for over 20 years and has established itself as an experienced and reliable broker for traders in a wide range of regions in the world, for example in South Africa, where forex trading is quite popular. The best forex companies in South Africa are regulated by FSCA which is in favor of a forex broker.

It is also necessary to evaluate the volume of services provided, which include a line of trading accounts, trading conditions, order execution speed and spreads. Exness offers clients 6 types of trading accounts, from which you can choose the most suitable option for your trading strategy, as well as free demo accounts. Minimum deposit from $0, maximum leverage – 1000, low spreads from 0 pips, deep liquidity and order execution speed of less than one millisecond. To test the quality of services provided by Exness, open a free demo account or MT4.

It is essential for the evaluation of a broker that it is easy and quick to deposit and withdraw funds from a trading account, the availability of a variety of payment systems that flexibly take into account all the needs of clients, with minimal commissions for making a payment. Exness clients can replenish their trading account using traditional methods: bank transfer or plastic card, as well as “electronic money” through payment systems. You can also use cryptocurrency wallets to replenish your account and withdraw profits.

All transactions of the Exness clients are securely protected, both at the legal level and with reliable encryption systems. And finally, an important indicator is the availability of a license from the regulatory authority. Exness is based on strict compliance with the requirements of applicable legislation, as well as the requirements of national regulators.

Trader’s Assistants

High technologies, artificial intelligence and neural networks have completely changed the approach to trading. For a long time, no one trades by phone, placing orders by voice, but many have already moved away from “manual trading”, when each order is placed personally by the trader. Trading advisors (robots) and services for copying trading signals have become their indispensable assistants. Thanks to them, traders can make a huge number of transactions exactly following the chosen strategy and significantly increase the profitability and reliability of trading.

Trading Advisors

Trading advisors are computer programs based on neural networks that conduct independent trading, reacting to changes in the exchange rates of currency pairs. A robot adviser can be developed and taught to trade on your own, or you can buy a ready-made robot. Their main advantage is the release of traders from routine trading and random mistakes.

Copying Signals

Signal copying is a relatively new trading technology in which one trader copies another trader’s trades automatically. This allows you to quickly start earning on Forex, even without sufficient experience and knowledge. At the same time, you are in full control of your trading account and can stop the service at any time or use signals from several providers at the same time. As a rule, trading signals are generated by trading robots created by very experienced traders.

Currency pairs

Two currencies, in which the value of one is determined relative to the other, make up a currency pair. In fact, this is a mathematical division operation in which X is divided by Y (X / Y), resulting in their ratio. “Numerator” and “Denominator” in currency pairs cannot change places, for example, there is only a EUR/USD pair, but there is no USD/EUR pair. The ratio of the two currencies expresses the number that is displayed in the trading system, usually accurate to the fourth or fifth digit, depending on the currency pair and the type of account selected.

For example, the EUR/USD quote is 1.08755, while the significantly cheaper Hungarian Forint against the US dollar – USD/HUF – is 311.211

Conclusion

Once you are comfortable with your understanding of support and resistance levels, gradually adding additional trading indicators to your backtesting strategy will help you better understand the mechanics of the market. Forex platform providers typically offer many different types of technical trading indicators. Two examples of forex trading indicators are the stochastic or momentum indicators and the Relative Strength Index (RSI).

By backtesting charts with indicators and support and resistance levels for SIM trading, you should begin to understand which market movement is comfortable for you to trade. This is a significant step as the forex strategy you choose must be tailored to the degree of risk you are willing to take. Remember that although backtesting can form the basis for building a forex trading strategy, it does not always lead to successful deals. Past results are not indicative of future results, and you should only use discretionary funds to trade. It is essential to keep and know how much risk you can handle when trading your strategy.

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