About the Forex Market (Origin of Forex Trading)
Many new traders like online business operators, ask about the forex market. The Forex market is an investment market with the scheme of buying and selling currencies with other currencies. Every investment in the capital market has a High Risk, High Profit.
Forex trading is a market that has the largest and most liquid activity in the world today. This market operates 24 hours a day and 5 days a week. Physical location allows this market to operate 24 hours. Then move from one time zone to another in the world financial center.
As an OTC (Over the Counter) product, the forex market moves continuously from Australia, Asia, Europe and America. The forex market operates without physical location and is not a centralized exchange. Operations occur between global banks, companies, and individuals who exchange between one currency and another.
Forex trading is trading or foreign exchange. Unlike stock markets or stock exchanges that often experience gaps, market fluctuations without dramatic changes.
About the Forex Market
There is almost no problem with the market because of the large daily turnover in the forex market. According to a survey conducted in 2010 the value of foreign exchange transactions reached 3.8 trillion US dollars per day.
Actually the existence of foreign exchange trading has long existed. Namely since the discovery of the technique of converting a country’s currency into another country’s currency. However, Forex trading only exists after the determination of the futures contract. In this case, IMM (International Money Market) was established in 1972. Published by the CME (Chicago Mercantile Exchange, which specifically handles perishable commodity products).
Other examples are LIFPE (London International Financial Futures Exchange), TIFFE (Tokyo International Financial Futures Exchange), and so on.
The circulation of money that occurs on the foreign exchange market is very large, worth 3.8 trillion USD per day. This amount is 40 times greater than the velocity of money on other futures exchanges, as well as developed countries’ stock exchanges in the world.
Large trading volume is very liquid. Control of trade is not a few parties who have large capital. Thus, the movement of this currency depends entirely on the market mechanism. There are many big boys in forex trading. But none of them can control foreign exchange rate movements.
The currency used in forex trading
Currency that is often traded on the forex market is a developed country (major currency). Such as US Dollar (USD), Japanese Yen (JPY), Swiss Franc (CHF), British Pound (GBP), Australian Dollar (AUD), and Euro (EUR). All of these currencies are traded in pairs. For example GBP / USD, EUR / USD, EUR / GBP, CHF / JPY, and so on.
As a beginner, you might think. “Then where do I make a profit from this investment?” The profit from this investment comes from the difference in value. That is when we buy and sell the currency we trade. And the difference appears as a result of price fluctuations.
The average time needed to buy and sell is no more than one month. Forex trading is an investment with a short period of time.
What’s the difference between forex trading and buying and selling at a money changer?
Furthermore, questions may arise in your mind, “Then, what’s the difference between forex trading and buying and selling at a money changer? The difference is quite large, namely:
- In the foreign exchange market, the currency pair traded is a developed country (major currency).
- Forex trading does not involve trading money physically, while at the money changer there is a physical exchange of currencies.
- Forex trading can be run with a margin or guarantee system.
- In forex trading there is a known leverage, for example 1: 100 leverage, which means that with 1% we can buy 100% of the value of a capital contract.
For example, if you want to buy US $ 10,000, you only need to spend 1% of the funds. That is US $ 100 as collateral. But the profit from US dollars is equal to the value of US $ 10,000 that we buy.
Why is that?. Because forex trading does not involve physical forms.