Forex is an over-the-counter market where the currencies corresponding to different economic zones are traded.
Etymologically speaking, “Forex” is a contraction of “Foreign Exchange” designating the foreign exchange market.
It is one of the most liquid markets, so over $ 4,000 billion is traded daily.
Unlike the stock exchanges that close at the end of the day, the latter remains open 24 hours a day from Monday to Friday.
The quotations are offered in the form of pairs (also known as “cross”), that is to say that one operates in this market by buying one currency in front of another.
In order to distinguish the different parities on the market, the ISO code is used, it consists of three letters representing the currency of a region.
For example, for the euro / dollar pair, you will find EUR / USD. In order to trade on the Forex, it is advisable to go through a broker to generate its positions on the market. The broker can play two roles: he simply sends the orders on the interbank market and recovers a commission (a broker no dealing deal), or he can be a counterpart to your position Case we will talk about a broker market maker. Forex brokers usually give access to very strong leverage (up to 500: 1). Moreover, it is possible to trade with small accounts (from a few tens of euros), which is not the case for all types of financial products (future contracts, shares, etc.).
The principle of online trading
Trading involves making profits by speculating on the variation of an exchange rate. Contrary to popular belief, it is just as possible to bet on a rise as on a decline. There are three main types of analyzes in order to anticipate price movements.
Technical analysis which is based on the study of graphs. The fundamental analysis which is based on the macroeconomic context and on the publication of economic statistics. And to finish the quantitative analysis that it, deals exclusively with mathematics and probabilities (reserved for professionals in general).
Whatever its point of view, it is necessary to establish a rigorous trading plan in order to ensure the greatest possible regularity. More concretely, before seeking to anticipate movements, one must understand how the investment on Forex. What we have to understand is that in this market we do not invest our own money.
The balance of the account serves as a “guarantee”, in reality a position will be in the form of a “lot”. The basic lot is worth 100,000 currency units (euros for example), the mini batch is worth 10,000 units of currency and the micro 1000 units. By opening your position, you can choose its size, ie the number of lots used, if you choose to enter with 4000 euros, you must put 4 micro lots. The limit of the amount of the position depends on the maximum leverage offered by the broker, if this is 500 for example, you can open positions 500 times larger than the size of your account.