Learning forex trading for beginners is my goal of writing this article because many misunderstood this instrument. The misguided, misunderstanding that makes not a few people deceived and a big loss in forex, although, in fact, forex trading can bring a big return as long as it understands how to play.
What's the biggest financial transaction in the world?
Maybe you'll say stocks because every day we read in the newspapers and see on TV about the excitement of stock exchanges in different parts of the world. I also have the same understanding.
The three largest exchanges in the world – NYSE, London, Tokyo – combined the transaction amount is USD 300 Billion per day.
Big, isn't it?
Forex trading records a transaction value of USD 6.6 Trillion per day, according to The International Settlement Bank. Many times the value of stock transactions around the world.
I was surprised after knowing this data because so far rarely exposed to news forex trading, do not think so big forex transactions in the world.
Unfortunately, forex has a bad stamp in Indonesia. Considered fraud investment, gambling, speculation, and so forth.
I try to review aspects of forex trading, so you can decide for yourself whether forex is a fraud, gambling, or speculation. Hopefully with this information can add insight and perspective to all of us.
What is Forex Trading
For many people, forex is we go to a money changer, exchange money, take home dollars or euros, it is considered a forex transaction.
There's something in the take-home stuff.
Forex trading is different, no goods or money you take home.
We retreat for a while, what is the purpose of trading - buy at a cheap price and sell at an expensive price (buy low, sell high) or sell at a high price, buy at a low price (sell high, buy low). Forex trading has the same goal.
Well, the exchange rate of currencies becomes the object of forex trading. Buy when the exchange rate trend strengthens and sell if the trend is the opposite.
1. Forex Market
This market has a different character to the stock market, namely:
Over the Counter (OTC)
Unlike stocks where transactions occur centrally on the stock exchange between 3 parties (you, brokers, and the Stock Exchange), forex transactions are Over the Counter only between two parties (you and the broker).
In forex, because transactions do not occur on one exchange, but occur between you and the broker, as a result, the exchange rate of forex currency can differ in one broker with another broker.
Besides, the absence of exchanges in forex makes the role of brokers to be very central. Because there are only you and the broker who make the transaction.
It must be correctly ensured that the broker can be trusted and legit because there are no other parties involved in forex transactions.
No Exchange of Goods
When you buy shares, you go home with the shares, which in this case are kept in custody, and these shares prove ownership rights to the company. So there's stuff you have.
Forex trading is different. You do not hold the goods, there is no currency exchange, such as during transactions on money changer.
When closing a forex position, you see the price difference only, and pay (receive) for the price difference, depending on the profit or loss of your position.
2. Advantages & Benefits
Impossible, the forex market becomes so large the value of transactions, if not have an advantage. These include:
a. Highly Liquid Market
Many parties - countries, corporations, investors - do forex transactions every day that make the market very liquid, the end of which is profitable for the players because it can easily do buying and selling.
b. Huge Profit Potential
Maybe this is too provocative, but if you want to profit fast, want to get rich quickly, play in the forex market is one of them.
The reason;
• Leverage, you can trade in large quantities with minimum capital. Later I explain more clearly what it is and how Leverage works.
• High volatility in the forex market makes the opportunity to score profits to be great. High-Risk High Return.
c. Can Sell and Buy
Unlike in stocks, which can only buy first new sell, in the forex market, you can put a sell and buy at the same time. You don't have to have the goods to be able to sell in forex trading.
By being able to sell and buy, you can follow anywhere in the direction of the market. As the market increases you sell, on the contrary when the market declines you sell.
That means the opportunity for profit is becoming more wide open.
d. Minimum Capital
Because of the leverage, capital to be able to play forex becomes small and affordable but has buying power for large investments. One example, in the forex broker that I met, investors only need $25 capital to make a forex transaction worth $ 1000.
The small amount of capital makes trading access open to many people. Plus the convenience offered by online trading facilities.
3. Legality of Forex Brokers
The over-the-counter (OTC) nature of forex trading makes the broker's role very central because only you and the broker when making transactions, unlike in stocks that have the Stock Exchange as the central transaction.
4. How Forex Trading Works
The principle of trading on forex is to buy low sell high and sell high buy low. Traders profit from the difference in buy price and selling price.
When you estimate that the price will increase then install a buy position, instead install a selling position if the price is expected to weaken.
How to determine the price of forex?