What Is FOREX Trading Platform And How Does It Work?
What exactly is FOREX? World market has changed dramatically in recent years. The new investment strategies emphasize on risk minimization. Among the most profitable market opportunities open to traders is FOREX (Foreign Exchange Market). FOREX trading platform has a daily turnover of US$3. 2 trillion. When it comes about the largest financial market in the world, it’s all about buying and selling currencies, which are traded in pairs.
The simultaneous buying of one currency and selling of another is determined by two factors. First of all, it’s about companies making transactions in foreign countries, generating approximately 5% of the daily turnover. Secondly, we’re talking the speculation for profit, which represents 95%.
How does FOREX work? - Most traders focus on major currencies. In the present, over 85% of daily transactions involve trading this type of currencies including U. S. Dollar, Euro, Japanese Yen, British Pound, Canadian Dollar, Swiss Franc and Australian Dollar. Open 24 hours a day, FOREX trading begins in Sydney and moves around the globe. Investors can react immediately to currency fluctuations caused by economic, social and political events, whenever they occur.
FOREX market is considered an over-the-counter market, because transactions are conducted either by telephone or by electronic networks, having no central exchange.
It’s not difficult at all to read and understand a foreign exchange quote. All you have to know is that the first currency listed is the base currency, while the value of the base currency is always 1. The US Dollar is the main currency for quotes, so you must appreciate foreign currencies by considering the value of USD.
When using FOREX trading platform, often you’ll see a quote of 2 sides, namely the BID and the ASK. The BID is the price at which you can sell base currency (at the same time buying the counter currency). The ASK is the price at which you can BUY base currency (at the same time selling the counter-pair).
What matters the most is to be aware that every investment is risky. You can never be 100% sure about how exchange rates will move. Therefore, it’s recommended to use stop-loss orders, which are specific instructions on how to exit your position if the price reaches a certain point.
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