What is Forex Trading: Definition, Markets and Forex Basics

What is Forex Trading: Definition, Markets and Forex Basics - Many people say they can get rich quick if trading forex. However, this tempting lure is not necessarily accompanied by an understanding of what forex trading is, both its characteristics, advantages and risks. In this review, we will discuss some of the basics of forex trading that everyone must know.

What is Forex Trading? Forex trading is currency trading from different countries with the aim of making a profit. In this case, forex stands for Foreign Exchange.

An example of forex trading is buying Euros (Europe's main currency), while simultaneously selling USD, EUR/USD for short.

In the imagination of ordinary people, the notion of forex trading is the activity of exchanging money at a Money Changer, namely buying and selling foreign currencies manually through money changers. In fact, forex trading is different from manual transactions such as in Money Changer.

Generally, the purpose of someone buying and selling money at Money Changer is because of the need to exchange currency for transactions in different countries, so that there is a physical exchange of money.

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Meanwhile, forex trading is carried out online with the sole aim of making a profit. It needs to be understood, forex trading is a business activity, investment, and can even become a profession.

On an international scale, foreign exchange (forex) trading is carried out by various parties, ranging from governments, central banks, multinational companies, to certain individuals who have large amounts of assets (Big Players).

Currency buying and selling transactions between various parties do not take place in a market with a physical building, but in an invisible network called the "forex market".

Along with technological developments, forex trading reaches a wider scope. Through the internet, forex trading can now be done by anyone, anytime, and anywhere. Now, everyone can trade forex. You and I can trade forex online easily and with as little as 10 Dollars.

Forex Market

The forex market is different from the traditional market. Because currency is being traded here, the market (where traders/market players buy and sell) is not in the form of a specific building, and each market player can play a double role as a seller as well as a buyer.

Who are the participants in this forex market? very diverse: it can be multinational banks, central banks, large corporations, governments of any country, financial institutions, speculators, etc.

Given the global scope and participants, the forex market has become very attractive and profitable. Because it is global, the forex market is the market where the velocity of money is the greatest (reaching $ 4 trillion per day), and is very liquid (you can buy and sell at market prices, regardless of the amount). The forex market is also open 24 hours non-stop, from Monday to Friday. So, we can trade whenever according to our free time.

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, trades are made in four sessions:

Wherever you are, buying and selling can still be done because the forex market does not have a specific physical location, and transactions can be done online through the forex trading platform.

Platforms can be in the form of software for PCs, browser-based web applications, or mobile applications (mobile app). Thus, forex trading activities can be done anywhere and anytime.

Forex Trading Opportunities

In simple terms, the goal of forex trading is to profit from rising and falling currency exchange rates. This can be achieved because conditions and prices on the forex market move very dynamically, can change at any time quickly in response to events, be it economic, political, war, disaster, etc.

Even for regions with advanced and strong economies such as the US, UK, Eurozone or Japan; there is even a little bit of sensitive information, then the price of the currency can move up and down. This is what traders see as an opportunity and an opportunity to make a profit.

Online Forex trading with the aim of obtaining such profits is carried out through the intermediary of forex brokers. The capital required is very affordable; can start from just $ 10, or even free by using the bonus funds provided by the broker.

Forex Trading Risks

The biggest risk comes from the price movement itself. If you can analyze market conditions and make the right transaction arrangements, you can get profits.

Forex trading can quickly make you rich or poor. Because of this big risk, you must be wise and truly understand forex completely before deciding to jump into it.