Establishment Of Foreign Exchange Market
Established in 1971 The forex (short for Foreign Exchange) is the Foreign Exchange Market, the market is devoted to various world currencies, including the price varies depending on the economic health of the country or geographical area to which they are attached. This market connects listings distributed by all major banks worldwide, to determine the price of each currency. That's why we call it a market 'interbank'. It is logically open 24 hours over 24 to accommodate different time zones and 7 days on 7, although intermediaries to intervene in these markets, brokers do not allow trading the weekend, including the volatility is too low.
Still reserved for professionals from the investment or business wishing to hedge against fluctuations in currencies of countries in which they had investments there are 10 to 15 years, Forex, which is the largest financial market in the world, s 'has been gradually opened to private and institutional speculators to experience strong growth in this type of investors in recent years. If interested in more and more people because it seems at first sight easier access, less difficult to analyze and more exciting than the stock market that we hear most about in the media.
Specifically, the Foreign exchange market, you exchange one currency against another. So when you come on the market, you do not take a position on a currency but a currency pair. For example, when it is positioned to buy the euro, we just do not buy the euro, but they sell other currencies against the euro. For example, if you buy the Euro-Dollar, it means you are betting on a rise of the Euro against the Dollar, in conversely if you sell this pair. Suppose the euro rises against the dollar, and he may at the same time decrease against another currency like the Swiss Franc for example. It is noteworthy that some correlation can be observed between the different currencies in this regard, we have just made a table explaining this phenomenon in this lesson. This may seem a bit complex at first sight, but you'll get used to it very quickly.
A big advantage, which ultimately is not really a wallet for beginners, is that the Forex allows traders to easily take advantage of a highly leveraged. What is leverage? Well it's a multiplication factor to your capital. Specifically, if you have a starting capital of 1000 euro, your broker or the equivalent of your online broker for the stock market, then the intermediary between you and the markets, to lend you the money you n 'have not, your potential gains are greater. If you take a lever 10 with your capital of 1000 euros, you can enter the market with 10 000. Seen like this, it might seem tempting, but again, there is no easy money in financial markets, and examples of novice traders who thought making a fortune in a few weeks thanks to Forex, and finally emptied their trading account in a few days or few hours are legion. For if this system allows larger gains, it also allows you greater losses, and risk management is critical to achieve positive results over the long term.
The leverage is a double-edged sword that often declare victory two or three days when a beginner starts in Trading Forex, before he settled his account on the fourth day. However, it can be used, provided good look, analyze, manage your risk, your character, and use it to create a money management that meets your criteria and your goals.
Often a question comes from people discovering that market and leverage up to 500: Do I owe money to my broker? Well it depends on your status and your broker, but in most cases, fortunately, the answer is no, because to protect you against having a negative balance, most of the brokers cut Automatically your positions from a certain level, the level of margin (This margin varies from broker, she can go from 0.25% to several%). This allows you to keep a positive balance in it any circumstance. Moreover, even if you're a broker in failing to apply this policy, which is very rare, according to the MiFID categories in which it evolves, individual investors are often protected against negative balances. To have the heart net, do so much to ask the customer service the broker you chose if it implements a policy to protect against negative balances before opening an account.
Example:
I have a capital of 2,000 euros. I buy the dollar against the Euro, with a lever 10, a position of 20 000 euros (converted into dollars, then that here we buy the dollar).
If the dollar is 1%, I would have realized a gain of € 200. To this we must remove the spread or commission charged by the broker each time you enter the market. Spread this varies Brokers, and as pairs, but we shall return later. For the Euro - U.S. dollar, on average between 2 and 3.5 pips Spread, which represents your position 20 000 € between 4 and 7 Euros commission taken by your broker. (This will be the only money received by your broker, the fees are lower than the stock market, another advantage for this market).
If the dollar loses 1%, you realize a loss of € 200 or 10% of your capital minus 4 / 7 EUR Spread representing a net loss of 205 €.
On the web and in books to see all kinds of statistics, such as "90% of traders lose money" (some say 80%, other 95 %...). Personally, I can not tell you if these figures are accurate, because I do not know. However, what I think is that yes, a majority of traders lose money, but it must go further than this initial finding. Indeed, many people will start a little attired charmed by the promises of advertising brokers and other stakeholders in these markets, and some day lose all their capital insider. The most part of them will then curse the Forex and move on, then returning in the statistics of losers, others will persist in a bad way, and continue to lose money, and of others will learn from their failures and persevere. In my humble opinion, most of the traders who earn money today we started losing. I walk it without proof is just a feeling I have and not take for granted.
Finally, many are starting Forex like a casino that will save them a lot and quickly, without having a thorough understanding before completely disillusioned few days later, once their trading account emptied. We must not let themselves become discouraged, but persevere, because you can indeed actually earned money in the long term with the foreign exchange market and other financial markets. In this chapter, I will try to share with you my experience and mistakes.
