What is forex Best Business 2020? Forex stands for foreign exchange, is the most liquid market when comparing with other types of markets. In every trading day more than 5 trillion dollars transactions on the forex market.
Forex trading is trading currencies from different countries with the aim of making a profit. An example of forex trading is buying Euros (major European currencies), while simultaneously selling USD (American Currency). Which can be abbreviated as EUR/USD.
Forex trading is carried out online with the aim of gaining profits, forex trading is a business activity, investment, and even a profession. Therefore forex is very attractive for beginners, professionals, and experienced traders.
On an international scale, foreign exchange trading consists of various parties that do. Starting from the government, central banks, multinational companies, to certain individuals who have assets in large numbers (Big Player).
Forex trading transactions between various parties occur in an invisible network called the “forex market”. The more sophisticated technology makes foreign exchange trading reach a wider scope. Through the internet, forex trading can now be done by anyone, anytime, anywhere. Now, everyone can trade forex. You and I can also trade forex online easily and with capital as small as 10 Dollars.
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Understanding Forex Trading
The way online forex trading works is quite simple. Which is to get a profit from the difference between the buying price and the selling price by making a purchase transaction when the price is low and the transaction is selling when the price is high.
For example, we buy US dollars as much as $ 100 when the Rand to Dollar exchange rate is at the value of R 14,177 The Rand amount that we spend to get the $ 100 becomes R 1417.7
A week later, the US Dollar gets stronger until the exchange rate becomes R 14,300. If we sell the $ 100, it will profit R 13, because other people who want to buy the $ 100 now have to spend R 1430.
The forex market is different from traditional markets. Because here traded is the currency, where there is no special place like a traditional market because forex transactions through electronic transactions and every market player can act as a seller and buyer.
Who are these forex market players? very diverse: it can be multinational banks, central banks, large companies, the government of any country, financial institutions, speculators, etc.
Every day more than 4 trillion dollars are circulating in the market, this is the most liquid market. Given the global scope and player, the forex market is very attractive and profitable. So globally, the forex market is the biggest and most liquid market for money circulation.
What is the forex market hours?
Unlike traditional markets, the forex market is also open 24 hours, from Monday to Friday. provide opportunities at any time for traders to make transactions.
The forex market can be open 24 hours a day due to differences in time and working hours in each of the world’s financial centers. In more detail, trading is carried out in four sessions.
Wherever you are, you can buy and sell because the forex market does not have a specific physical location, by conducting online transactions through the trading platform.
The platform can be software for PCs, browser-based web applications, or mobile applications. With that convenience, forex trading can be done anywhere and anytime.
Forex Market Function
In the process, forex has several main functions that are very influential to the perpetrators. The function of forex is split into 3, namely as follows:
The first function is to simplify the process of currency exchange.
As we know, in daily economic activities, of course, humans sometimes need funds in the form of currencies of other countries. Whether it’s used for business, travel, shopping, or savings.
Currency exchange can be done with a system called Clearing. Now one of the functions of forex itself is to provide this service.
For simplicity, an example of this service is a foreign exchange service that you usually find in various places, from banks to money counters in various places.
The second function is for Hedging.
Forex traders do this as a protection so that the value of investment funds is not reduced or lost when he sells currencies in 2 different markets. In this case also the role of banks, both domestic banks and US foreign banks as the guarantor of funds.
The third function is to conduct Arbitration.
Arbitration is basically the difference in interest rates from two different currencies. And the act of arbitration is an action taken to benefit from the difference in the currency itself.
Simply put, this action is by buying a low-value currency in the Forex Market in a country and selling a high-value currency.
Players in the Forex Market.
In the forex market, of course, there are several parties involved and giving influence in it or the term as a player in the market. Forex market players divided into six with follows
Banks has a big role in the forex market. In this case, the term known is Interbank Market.
In carrying out its functions, sometimes banks will process the buying and selling of currencies on behalf of their customers. But in large quantities, the transaction will be carried out on behalf of the bank itself.
2. Business Needs.
The second forex market participant is the need for a company or business players when making payments using foreign currencies. The results will be different if you talk about big companies.
Here the big companies have a large and unpredictable contribution if they carry out a large number of foreign currency releases. When they release it, the market or speculators cannot expect it directly. As a result, the value of a currency can move up or down.
3. Central Bank.
The Central Bank, in this case, has a role as the controller of the money supply, the occurrence of inflation, and also related to interest rates.
With its very important role, the Central Bank can easily influence the development of the forex market.
One of the big roles of a country’s Central Bank is that just making an intervention is able to create turmoil in the forex or foreign exchange market conditions. This is due to concerns about the actions of the Central Bank which can raise or lower currency rates. So a little more central bank policy determines the sustainability of the currency market.
4. Company Investment.
Generally, Investment Management Companies that play in the forex market do not make this business the main source of income especially as a step of speculation.
The company usually manages several funds such as pension funds or donations from the foundation. All funds they use in the forex market are sometimes only to get additional income for the company.
5. Hedge funds.
Hedge funds are companies that do play in the forex market as speculators. The funds they release are truly maximized capital in the forex market, there is no other reason for them except to get a large profit from these activities.
Surprisingly enough, Hedge funds have the ability to grow big and even have the ability to influence currency values better than the Central Bank.
If this happens it will be very difficult for the value of the currency to move well because it is already under the control of a corporation that is profit-oriented.
6. Forex Brokers.
Basically, forex brokers can be individuals, groups, or companies that have jobs to bridge between customers/buyers and sellers of foreign currencies. The existence of a forex broker is indeed very helpful for the forex trader.
But it must be vigilant because there is a forex brokerage company that is not responsible or even scam is actually the most detrimental party, especially for a beginner in the forex business.
There is the main pair is the currency of a country with United States Dollars (US Dollars). Besides currencies, commodities are also traded in US dollars.
The following is a list of major currency pairs along with their symbols and nicknames.
EUR / USD – Euro vs. the U.S. Dollar (Fiber)
GBP / USD – British Pound vs. the U.S. Dollar (Sterling, Cable)
AUD / USD – Australian Dollar vs. the U.S. Dollar (Aussie)
NZD / USD – New Zealand Dollar vs. the U.S. Dollar (Kiwi)
USD / JPY – U.S. Dollar vs. the Japanese Yen
USD / CHF – U.S. Dollar vs. the Swiss Franc (Swissie)
USD / CAD – U.S. Dollar vs. the Canadian Dollar (Loonie)
XAU / USD – (Gold)
XAG / USD – (Silver)
There is also a Cross Currency. This is a currency pair other than US Dollar, like as.
AUD / CAD – Australian Dollar vs. the Canadian Dollar
AUD / NZD – Australian Dollar vs. the New Zealand Dollar
CAD / JPY – Canadian Dollar vs. the Japanese Yen
CHF / JPY – Swiss Franc vs. the Japanese Yen
EUR / AUD – Euro vs. the Australian Dollar
AUD / CHF – Australian Dollar vs. the Swiss Franc
EUR / CAD – Euro vs. the Canadian Dollar
EUR / CHF – Euro vs. the Swiss Franc
AUD / JPY – Australian Dollar vs. the Japanese Yen
EUR / GBP – Euro vs. the British Pound
EUR / JPY – Euro vs. the Japanese Yen
GBP / CHF – British Pound vs. the Swiss Franc
EUR / NZD – Euro vs. the New Zealand Dollar
GBP / AUD – British Pound vs. the Australian Dollar
GBP / JPY – British Pound vs. the Japanese Yen
NZD / JPY – vs. New Zealand dollar the Japanese Yen
In addition, there are exotic pairs. Exotic currency pairs are the currencies of developing economies with high rates, with US Dollars or Euros.
USD / TRY – U.S. Dollar vs. the Turkish Lira
EUR / TRY – Euro vs. the Turkish Lira
USD / ZAR – U.S. Dollar vs. the South African Rand
USD / MXN – U.S. Dollar vs. the Mexican Peso
USD / SGD – U.S. Dollar vs. the Singapore Dollar
But trading with exotic currency pairs has high spreads and low liquidity, so forex traders rarely choose it.
Basic foreign currency trading which is the key to successful trading is
1. Trade with the Trend
For forex traders, the trend is a friend to get profit, fighting the trend will destroy your capital.
2. Buy at Support
Literally, this suggests opening a “buy” position on the pair when the price is at the lowest level (support level).
3. Sell at Resistance
Contrary to point two, the “sell” position should be opened when the price is at the top (resistance level), where the price will turn from up to down.
Is Forex trading profitable in South Africa?
Forex brokers offer high leverage even up to 1: 1000 allowing traders to initiate orders with a number of light margin requirements. This can increase profits faster, but on the other hand, can cause a large loss of capital in the account.
Trading on margin is different from traditional trading, it is like a broker giving a loan to a trader to open an order with light conditions for a large actual contract value.
Forex trading in the global economic recession due to the coronavirus is likely to experience increased interest. This is because forex is an online business that is run remotely, it doesn’t have to leave the house and is safer from the threat of the coronavirus by working from home.
Many people will be looking for information on how to profit in forex for the long term. It may not be easy, but it will take a struggle with time.
2020 is the year when many companies experience a global economic downturn due to the impact of the coronavirus. Looking for a profitable business in 2020 does require knowledge and there is a desire to achieve success.
Forex trading is just one of the many types of online businesses that are worth trying. Of course, this requires gradual steps in learning. Is forex trading still profitable? this all will depend on the risks taken and how the trader is able to master or approach the market properly.
Are you ready to start trading?