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Registered in Seychelles SIBA (087989)
*Disclaimer* Forex and CFDs are leveraged products. They may not be suitable for you as they carry a high degree of risk to your capital and you can lose more than your initial investment. You should ensure you understand all of the risks.
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- What Is Fx?
- Why Trade Fx?
- What Drives The Fx Market?
- How Is Fx Traded?
- When to Buy? Sell?
- Where To Learn?
A Brief History of Forex or FX
The Breton Woods Agreement was initiated in 1944 in an effort to keep cash from draining out of war-ravaged
Europe. Currency values were pegged to the US dollar, which was then pegged to the price of gold.
The modern era of foreign exchange first emerged in 1971 with the collapse of the Bretton Woods Agreement. The US
dollar was no longer convertible into gold, signaling an increase in currency market volatility and trading
opportunities.
The collapse in 1973 of the subsequent Smithsonian and European Joint Float agreements signaled the true beginning
of the free-floating currency exchange system that drives the markets today. Starting in the 1980's, computer
technology extended the reach of the exchange marketplace.
Today, the values of the major world currencies are independent of each other, with intervention available to the
states only through the central banking system.
The foreign exchange (forex or FX) market exists wherever one currency is traded for another. It is the largest and
most liquid financial market in the world, and includes trading between large banks, central banks, currency
speculators, multinational corporations, governments, and other financial markets and institutions. The average daily
trade in the global forex and related markets is continously growing and was last reported to be over US$ 4 trillion in
April 2007 by the Bank for International Settlement; it is more than three times the aggregate amount of the US
equity and treasury markets combined.
The forex market has no physical location and no central exchange. It operates through a global network of banks,
corporations and individuals trading one currency for another. The lack of a physical exchange enables the forex
market to operate on a 24-hour basis, spanning from one zone to another in all the major financial centers.
Leverage/margin
The degree of leverage in trading financial products has been increasing over the years. Now the FX market has reached the point at which a trader can virtually trade with nothing down.
Traditionally, if an investor wanted to buy stocks and shares, they had to provide the total amount of the funds required for the position.
This has slowly evolved to the point where investors can now put down a 10% deposit or margin and take a position equivalent to ten times that size in some markets. Now investors often only have to put down 2-3%, thus getting up to 50 times leverage.
This gives players the chance to make bigger returns as the positions they can hold in the market are much larger. Conversely however, the risks are greater too. AzenFx.com allows you to open a live account and start trading at $200.
The degree of leverage in trading financial products has been increasing over the years. Now the FX market has reached the point at which a trader can virtually trade with nothing down.
Traditionally, if an investor wanted to buy stocks and shares, they had to provide the total amount of the funds required for the position.
This has slowly evolved to the point where investors can now put down a 10% deposit or margin and take a position equivalent to ten times that size in some markets. Now investors often only have to put down 2-3%, thus getting up to 50 times leverage.
This gives players the chance to make bigger returns as the positions they can hold in the market are much larger. Conversely however, the risks are greater too. AzenFx.com allows you to open a live account and start trading at $200.
High Liquidity
Because the Forex Market is so enormous, it is also extremely liquid. This means that under normal market conditions, with a click of a mouse you can instantaneously buy and sell at will. You are never “stuck” in a trade. You can even set your online trading platform to automatically close your position at your desired profit level (a limit order), and/or close a trade if a trade is going against you (a stop loss order).
Because the Forex Market is so enormous, it is also extremely liquid. This means that under normal market conditions, with a click of a mouse you can instantaneously buy and sell at will. You are never “stuck” in a trade. You can even set your online trading platform to automatically close your position at your desired profit level (a limit order), and/or close a trade if a trade is going against you (a stop loss order).
Trading forex
Over the last three decades, forex trading has become the world's largest financial market. With over $4 trillion traded daily, it is more than three times the aggregate amount of the US equity and treasury markets combined. The forex market is so liquid that there are always buyers and sellers to trade with.
Unlike other financial markets, the forex market has no physical location and no central exchange. It operates through a global network of banks, corporations and individuals trading one currency for another. The lack of a physical exchange enables the forex market to operate on a 24-hour basis, spanning from one zone to another in all the major financial centers.
Over the last three decades, forex trading has become the world's largest financial market. With over $4 trillion traded daily, it is more than three times the aggregate amount of the US equity and treasury markets combined. The forex market is so liquid that there are always buyers and sellers to trade with.
Unlike other financial markets, the forex market has no physical location and no central exchange. It operates through a global network of banks, corporations and individuals trading one currency for another. The lack of a physical exchange enables the forex market to operate on a 24-hour basis, spanning from one zone to another in all the major financial centers.
24-hour trading
One of the biggest advantages of trading forex is the opportunity to trade 24 hours a day. Unlike other markets which close and prevent you from taking advantage of market moving news, with FX you can react instantly to world events and increase your ability to make profits.
One of the biggest advantages of trading forex is the opportunity to trade 24 hours a day. Unlike other markets which close and prevent you from taking advantage of market moving news, with FX you can react instantly to world events and increase your ability to make profits.
Profit potential in falling markets - Since the market is always moving, there are always trading opportunities, whether a currency is strengthening or weakening in relation to another currency. Furthermore a trader has the ability to sell short a currency with the expectation that it will weaken versus another and buy it back more cheaply later, making a profit should that be the case.
Free “Demo” Accounts, News, Charts and Analysis.
Most online Forex brokers offer ‘demo’ accounts to practice trading, along with breaking Forex news and charting services. All free!
Free “Demo” Accounts, News, Charts and Analysis.
Most online Forex brokers offer ‘demo’ accounts to practice trading, along with breaking Forex news and charting services. All free!
What drives the forex market?
Currency prices are affected by a variety of economic and political conditions, but probably
the most important are interest rates, inflation and political stability.
Sometimes governments actually participate in the forex market to influence the value of
their currencies, either by flooding the market with their domestic currency in an attempt to
lower the price, or, conversely, buying in order to raise the price.
This is known as Central Bank intervention. Any of these factors, as well as large market
orders, can cause high volatility in currency prices. However, the size and volume of the
forex market makes it impossible for any one entity to "drive" the market for any length of
time.
In Short "No one can corner the market".
Who are the participants in the forex markets?
The reason that the forex market is referred to as an 'Interbank' market is due to the fact
that historically it has been dominated by banks, including central banks, commercial banks
and investment banks.
However, the percentage of other market participants is rapidly growing and now includes
large multinational corporations, global money managers, registered dealers, international
money brokers, futures and options traders and private speculators.
Currency prices only fluctuate relative to another currency, so they are always priced and traded in pairs. For example, the most traded pair is the euro against the US dollar, for which the abbreviation is EUR/USD. Below are the most traded currency pairs, also called majors:
EUR/USD Euro - US Dollar
USD/JPY US Dollar - Japanese Yen
GBP/USD British Pound - US Dollar
USD/CHF US Dollar - Swiss Franc
USD/CAD US Dollar - Canadian Dollar
AUD/USD Australian Dollar - US Dollar
NZD/USD New Zealand Dollar - US Dollar
The first currency is referred to as the base currency and the second one is referred to as the counter currency. So, in the EUR/USD example, the base currency is the euro while the counter currency is the US dollar. The price of a pair is the value of the base currency quoted in the counter currency.
So EUR/USD = 1.4212 actually means 1 EUR = 1.4212 USD
Currency pairs always have 2 prices: the sell price (or bid) and the buy price (or ask). When selling, the base currency is sold and the counter currency is bought. When buying, the base currency is bought and the counter currency is sold.
So, if you sell EUR/USD, 1 EUR = 1.4212 USD, if you buy EUR/USD, 1 EUR = 1.4214 USD
The difference between the sell price and the buy price is called the spread. The spread is usually measured in pips. A pip is the fourth digit after the decimal point of the price. In the case of the USD/JPY, it is the second digit.
In the case the spread is 2 pips.
EUR/USD Euro - US Dollar
USD/JPY US Dollar - Japanese Yen
GBP/USD British Pound - US Dollar
USD/CHF US Dollar - Swiss Franc
USD/CAD US Dollar - Canadian Dollar
AUD/USD Australian Dollar - US Dollar
NZD/USD New Zealand Dollar - US Dollar
The first currency is referred to as the base currency and the second one is referred to as the counter currency. So, in the EUR/USD example, the base currency is the euro while the counter currency is the US dollar. The price of a pair is the value of the base currency quoted in the counter currency.
So EUR/USD = 1.4212 actually means 1 EUR = 1.4212 USD
Currency pairs always have 2 prices: the sell price (or bid) and the buy price (or ask). When selling, the base currency is sold and the counter currency is bought. When buying, the base currency is bought and the counter currency is sold.
So, if you sell EUR/USD, 1 EUR = 1.4212 USD, if you buy EUR/USD, 1 EUR = 1.4214 USD
The difference between the sell price and the buy price is called the spread. The spread is usually measured in pips. A pip is the fourth digit after the decimal point of the price. In the case of the USD/JPY, it is the second digit.
In the case the spread is 2 pips.
|
EUR
|
USD
|
|
Sell 1.4245
|
Buy 1.4247
|
|
EUR
|
USD
|
|
Sell 1.4245
|
Buy 1.4247
|
The aim of being profitable in forex is buying when the value of a currency pair goes up and selling when is goes down. A currency pair goes up when the base currency's value increases with regard to the counter currency. Inversely, a currency pair falls when the base currency's value decreases with regard to the counter currency. For example, the EUR/USD will go up if the euro strengthens with regards to the US dollar. If, on the contrary, the US dollar strengthens, which means the euro weakens, the EUR/USD will go down.
As with any financial investment, the aim is to buy an instrument at a low price and sell it at a higher price. In forex, it is also possible to sell at a high price and buy at a lower price thus making profits under all market conditions.
As with any financial investment, the aim is to buy an instrument at a low price and sell it at a higher price. In forex, it is also possible to sell at a high price and buy at a lower price thus making profits under all market conditions.
|
EUR
|
USD
|
|
Sell 1.4212
|
Buy 1.4214
|
Downward market (bearish) example Initial price:
You sell 100'000 EUR, you are paid 143'840.- USD
The market goes down, after some time the new prices for EUR/USD are:
You decide to close this position, so you buy
You buy 100'000 EUR, pay 141'700.- USD
Your profit: 143'840 - 141'700 = 2'140 USD
You sell 100'000 EUR, you are paid 143'840.- USD
The market goes down, after some time the new prices for EUR/USD are:
You decide to close this position, so you buy
You buy 100'000 EUR, pay 141'700.- USD
Your profit: 143'840 - 141'700 = 2'140 USD
|
EUR
|
USD
|
|
Sell 1.4384
|
Buy 1.4386
|
|
EUR
|
USD
|
|
Sell 1.4168
|
Buy 1.4170
|
Each transaction has two sides, a buy and sell (or a sell and buy). When buying, traders often call it going long, when selling, going short. Margin trading As you have seen in the examples above, the larger the transaction amount, the larger the potential. Does this mean you have deposit a large amount in order to open an account and start trading? The answer is NO, not with margin trading.
When you send funds to your broker, they are not actually used in the transactions. Instead, this deposit acts as a guarantee (also called collateral) used to cover the risk and provide protection from losses incurred during trading. This system allows traders to open positions for larger amounts and increase their purchasing power.
AzenFx.com offers a 1% margin (or 1:100 leverage) with means you can open positions for 100 times your deposit.
If at any time, the funds in the account fall below the necessary margin, positions will automatically be closed. This protects the trader as the account can never go into negative balance, even in volatile, fast moving markets.
When you send funds to your broker, they are not actually used in the transactions. Instead, this deposit acts as a guarantee (also called collateral) used to cover the risk and provide protection from losses incurred during trading. This system allows traders to open positions for larger amounts and increase their purchasing power.
AzenFx.com offers a 1% margin (or 1:100 leverage) with means you can open positions for 100 times your deposit.
If at any time, the funds in the account fall below the necessary margin, positions will automatically be closed. This protects the trader as the account can never go into negative balance, even in volatile, fast moving markets.
Upward market (bullish) example Initial price:
You buy 100'000 EUR, you pay 142'140.- USD
The market goes up, after some time the new prices for EUR/USD are:
You decide to close this position, so you sell
You sell 100'000 EUR, you are paid 142'470.- USD
Your profit: 142'470 - 142'140 = 330 USD
You buy 100'000 EUR, you pay 142'140.- USD
The market goes up, after some time the new prices for EUR/USD are:
You decide to close this position, so you sell
You sell 100'000 EUR, you are paid 142'470.- USD
Your profit: 142'470 - 142'140 = 330 USD
There are two main ways of analysing the market:
Fundamental analysis: this uses economic, political, environmental and other factors and statistics to determine the future price movements of an instrument.
Technical analysis: in this case, traders study charts and past market performance to predict future price movements. Technical analysts argue that fundamental analysis is unnecessary are all relative information is already reflected in the price.
Usually, successful traders use a mix of both methods to better predict movements.
Other Methods of trading includes Price Action Movement, High Frequency Trading, Arbitrage and Waves.
What you should learn to be a profitable trader besides trading method are;
- Trading Strategy
- Money Management
- Trading Pscychology
We have partnered with reputable trainers in this industry to help you be a profitable trader.
For more information of our training schedules please email us at support@azenfx.com we might just be around the corner.
If you are a trainer/educator, we would love to team-up with you.
Fundamental analysis: this uses economic, political, environmental and other factors and statistics to determine the future price movements of an instrument.
Technical analysis: in this case, traders study charts and past market performance to predict future price movements. Technical analysts argue that fundamental analysis is unnecessary are all relative information is already reflected in the price.
Usually, successful traders use a mix of both methods to better predict movements.
Other Methods of trading includes Price Action Movement, High Frequency Trading, Arbitrage and Waves.
What you should learn to be a profitable trader besides trading method are;
- Trading Strategy
- Money Management
- Trading Pscychology
We have partnered with reputable trainers in this industry to help you be a profitable trader.
For more information of our training schedules please email us at support@azenfx.com we might just be around the corner.
If you are a trainer/educator, we would love to team-up with you.
