Forex is the international bank-to-bank currency market. Forex trade assumes purchasing or selling the currencies. Due to ever-changing currency rate, buying a currency at lower price and selling it at higher one you can gain profit catching its further movement correctly (for example: correctly determine the news).
Forex market partakers are: banks (central and commercial), pension funds, insurance companies, brokers, dealers and private investors. Because of a great participant’s number and similar deals volume a lot of transactions are executed during a few seconds.
A huge capital is not required for trading at Forex, as a broker gives loan leverage. Its size is equal to hundredfold amount of deposit, it means that a trader (participant playing at Forex) enters the market with a sum exceeding the amount for deals execution hundredfold.
Trading deal at Forex consists of 2 parts. First: a trader opens a position with a certain currency pair. Second: he closes the position with this pair. Trading deals at Forex are closed automatically during several seconds. However, even such a big deals quantity accomplished by the traders cannot put a substantial effect on the price.
Position opening in Forex trading is a process of requesting one currency from a broker for a certain quantity of another. The cost of the base currency in the first pair is called quotation displayed in the quoted currency unit. It has 2 figures: Bid - the cost of base currency sold for quoted one and Ask the price at which it is bought. A difference between them is called spread (it is the main income source for a broker), and point is the minimal price movement which can be accepted. Currency rate information is always available for those who operate at Forex market.
Forex trading is carried out by three ways. These methods involve several trading strategies. Traders with big trading experience at Forex develop their own strategies for several years, but there are some approved and really beneficial strategies:
Day Trading(intra-day short term trading)
Day Trading is opening of short term deals by a trader for 1 or 2 minute period up to couple of hours. Such deals are usually closed in the same trading day and almost never carried over the next one.
Traders using this kind of trading can always have a stable profit, making the right analysis of published news. At the same time, wrong news analysis and position setup can result in serious losses.
According to this kind of trading, a trader opens long period deals (from 1-2 days up to 1-2 months). Getting a big profit following this strategy is possible in case the deal remains opened not less than a few days. A good capital is needed for backing up such deals.
Technical analysis in Forex trade consists in the ability to estimate and make the right analysis of different chart types (bar, Japanese candles, lines) with currency pairs and figures displayed on them that gives an opportunity to forecast rate fluctuations of the currency pairs.
Carry trade is gaining acquisition from interest rates difference of currency pairs.
Using this type of trade, traders deals remain opened for a long period of time (from 2-3 months to 1 year and more). Such trading requires a big capital. It is used for waiting when the deal becomes profitable in order not to bear losses until the price changes to the right direction.
Also one of the advantages of Forex trade consists in that the work is run 24 hours 7 days a week (from Monday to Friday), therefore, regardless of the difference between the time zones and location you can continue taking part in trades. Such opportunity of trading at Forex is provided by the world financial centers managed by the national banks together with international banks where different countries capital is kept.
The major of them are located in: New York, London, Tokyo, Paris, Luxembourg, Singapore, and Austria. They allow supporting the liquidity for trading at Forex during the whole day and night.