To learn about the market, there is a need to go to the very basics of it.
- What exactly is fx?
- What goes on in the market?
- What is the nature of the market?
- Who are the participants in the market and what does it take to be a trader?
WHAT EXACTLY IS FOREX?
Fx means a foreign exchange of currency. When one currency is traded for another with the intention of making the profit, trade is said to have taken place. To promote, there is a market for it where buy and sell different currencies. This market is known as the market, it is the platform on which a trader can either buy or sell a currency.
WHAT GOES ON IN THE FOREX MARKET?
Trading of currencies, that is exactly what goes on in the market. A typical picture of what goes on in the market is like this:
Let us assume the currency pair in question is US dollar/Japanese Yen. Who trades the US dollar/Japanese Yen, after some careful analysis, suspects that the value of the US dollar will drop against the Japanese Yen, sells her US dollar in exchange for Japanese Yen. After the value of US dollar drops, the trader buys them back at a cheaper rate compared to what she sold them for before the depreciation. After the US dollar stabilises (that is, bounces back to its original price or more), sells them off at a higher price compared to what she bought them before, thereby making some profits.
That is pretty much what goes on in the market. There are a lot of things that goes on in-between like fx tools to help traders. That is where the complexity of the market comes in.
WHAT IS THE NATURE OF THE FOREX MARKET?
The market has high volatility. This means that there are always people to buy whatever currency is for sale and there are always people to sell whatever currency is on demand. The volatility of the market also makes it possible for one to cash out money without complications. Another attribute of the market is the fact that it is volatile. This means that the rate of making profits is high, as well as the rate of losing money. As a matter of fact, the success rate of the market is only 10%; while the rate of loss is 90%. This poor success-failure rate can be attributed to lack of preparation before entering the market. Many traders do not have dependable strategies, and this leads to losses. A strategy is important in the fx market; it should involve detailed analysis of the currency pair you intend to trade, the history of it, and its pattern.
As a matter of fact, the market needs proper preparation in order profitably. In proper preparation is the major reason traders lose in a majority of the trades they take part in.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.