FOREX GIST

Do you know that FOREX means Foreign Exchange?

Trading different currencies in the global market against each other for more, through traditional institutions, unlike the decentralized business with the web3 blockchain.

Forex trading simply means traders and investors make their money by speculating the exchange rate between two currencies.

Make this make sense, it cannot be this simple.

Well, it mostly is, see;

If the rate of the U.S dollar is speculated to rise compared to Euros, traders may buy U.S dollars and sell their Euros to get the profit from the rise, of course there’s also a risk of losing money if the exchange rate goes against you.

Absolutely sounds like a risky situation.

Exactly, that’s what every ‘buying and selling’ supposedly is, a RISKY situation.

TO BRAVE THE RISK AND MAKE THE PROFIT.

Let us talk about the profit, for what you stand to gain.

The first indication of a profitable market is usually the market size, being the largest most traded market in the world with high volatility, the gaining tendencies in the foreign exchange market are just as high.

Studies also indicate that this market trades about $4 — 5 Trillion every day, now unlike other institutions, there’s no dependence on people buying your products and services.

In Foreign exchange, you’re only expected to exert the same energy for any earnings,

What this means is; the same work you put into making $100 is the same work you’d put in to make $100000. The market is open 24 hours all five working days of the week and closes on the weekends.

The Forex market provides leverage for traders as well.

Now, Leverage according to Oxford languages is defined as shown below;

1. use borrowed capital for (an investment), expecting the profits made to be greater than the interest payable.

Saying that the foreign exchange market provides leverage, it simply means that you can trade with more than you have in your account.

A simple example is, if you have a $1,000 account and you are using 100:1 leverage, you can control a position worth $100,000 in the market.

It is important to note that this should only be done when you’re knowledgeable enough to control such a powerful tool because the loss could be just as huge.

Just like in any trade, it is important to search for key ways to manage risks when exchange rates go against you. Some of these key ways for risk management include;

• Stop Loss: This is an order placed to automatically close your position at a specific price and aides in limiting losses when the market moves against you.
• Take profit: This refers to an order you place with your broker to automatically close your position when it gets to a certain profit level, i.e; it locks your profit at that particular point.
• Demo Accounts: This is a practice account offered by brokers that allows you to trade on the forex market without risking any real money. These demo accounts are usually funded with virtual money, and allows you to strategize and test trades without financial risks.

This is where prediction/speculation comes in,

Speculation in the foreign exchange market is based on news of certain events, like;

Economic Data Releases: These include news on inflation and unemployment numbers.

If the data is better than expected, it can strengthen the currency you’re speculating on.

Central Bank Announcements: The policies and statements of central banks can move the markets and give you more information about the direction of a currency. Examples of such moves involve currency redesign and borrowing of huge loans.

Political Events: These can also have an impact on the markets and provide confirmation for your trading speculation.

THESAURUS.

1. BULLISH RUN: In a “bullish” run, the price of a currency is moving higher, and even when it dips, it gets to a higher low than the previous lows. So basically, the highs are getting higher, and the lows are getting higher. Indicating an upward trend.
2. BEARISH RUN: A “bearish” run is the opposite of a bullish run, the price of a currency is moving lower, and each time it peaks, it reaches a lower “high” than the previous peak, indicating a downward trend.
3. EQUITY: Open positions and cash balance inclusive, equity is the value of a traders account in forex.
4. FREE MARGIN: This is basically the difference between the total equity and used margin. Free margin is the amount of money in a trader’s account that is available for opening new positions. A trader’s free margin decreases when they open new positions, and increases when they close positions. Having a sufficient amount of free margin is important for maintaining a healthy trading account, and for taking advantage of new trading opportunities.
5. DIP: saying a market “dips” means that the price of an asset(currency) suddenly drops, before recovering or continuing to drop further. A “dip” is almost always a temporary drop in price, rather than a long-term downward trend. Dips can be caused by a variety of factors, such as economic news, political events, or even just normal market fluctuations. It is important to understand that dips are a normal part of market movements, and they don’t necessarily mean that a bearish trend is underway.

Disclaimer: This article is for educational purposes, Forex trading involves a huge level of risk so it is important for you to inquire from professionals before delving into the market.