Forex is the ideal market for beginners in trading: simpler than equity markets and derivatives markets, it is also incredibly accessible. Countless YouTube videos, training packs, forums are dedicated to him.
What is forex ? How does the foreign exchange/Forex market work? Who can trade Forex? What are the risks of trading Forex? How to avoid scams and other fraudulent Forex brokers? Can you make regular income from Forex Trading? All our explanations to help you visualize all the fundamental aspects related to Forex.
And we start right away with a definition of Forex!
What is Forex?
Forex (contraction of Foreign Exchange ) is the market where currencies are exchanged, with a daily total of transactions exceeding 6,600 billion dollars per day . Called FX, forex in various definitions, currency trading in forex is not consolidated on a centralized platform like stock trading is. Currencies are instead exchanged between players over the telephone or through electronic communication networks (ECN). The Forex is therefore open 24 hours a day from Sunday evening to Friday evening.
Forex is a very active market, based on a number of mechanisms and rules. We explain these mechanisms to you, as well as the advantages offered by this market, but also the risks …
How does Forex work?
Forex works as the combination of several decentralized markets . There is therefore not a single Forex market, but several Forex markets: in the lead, that of London, open from 9 a.m. to 6 p.m. (Paris time, GMT+1), and where nearly 40% of trade takes place daily world currencies. Then follow those of New York, Chicago and Tokyo. Here are also two important things to remember about how Forex works:
Forex is an over-the-counter market : currencies are traded directly between market participants (brokers, central banks, companies) and not through a centralized exchange platform. Unlike traditional values such as shares, Forex is therefore not managed by a stock exchange operator as the Paris, Brussels and Amsterdam Stock Exchanges can be with the Euronext company.
How Forex Works
Forex is not regulated by a single body : There is no single authority to regulate the foreign exchange market. Rather, there are several national regulators that oversee currency exchanges and financial intermediaries in each country. For example, in France there is the AMF (Autorité des Marchés Financiers), set up in 2003. On a European scale, there is the ESMA (European Securities and Markets Authority)
What are the advantages of Forex?
- Accessibility
- Flexibility
- bullish and bearish
Here are a few more things to help you understand each of the benefits of Forex:
💛 Forex is accessible : you can start Forex Trading with low capital, because Forex brokers allow you, for example, to trade the EUR/USD pair with a stake of A bet that corresponds to a position of €1,000, but on which the trader will only bet 3.33% of the funds, thanks to the leverage effect!
🕑 Forex is the most flexible market : the foreign exchange market is open 24 hours a day, 5 days a week. Indeed, the European stock market sessions being open from 8 a.m. to 6 p.m. (Paris time), the North American, Asian and Oceanian sessions take over, creating continuous exchanges.
💸 Bullish and bearish : one can speculate on currency pairs, regardless of the trend of their quotations, i.e. upwards or downwards.
Leverage : European traders can use high leverage, up to 1:30 on major currency pairs like EUR/USD. This means that the trader can only bet 3.33% of the total amount of each position!
Liquidity : currency markets are ultra-liquid, in other words it allows very high transaction volumes without much impact on prices. This of course varies by currency pair and time of day.
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