The forex market has been one of the largest markets in the world which involve the partaking of firms, government and Individu
The forex market has been one of the largest markets in the world which involve the partaking of firms, government and Individuals in exchange for values.
Meaning of Forex market
This is defined as a free platform that allows the exchange of currency to occur globally by individual or group of firms.
The main purpose of the FX market is to enable currencies to be differentiated with their values.
The forex market has been around for some decades now, with an estimated calculation, it is 500 years of existence. Actually, the exchange of money started around 6000BC ago, but the exact time cannot be specified.
Fact: Forex market was introduced by the Mesopotamia tribe which is located now in the Middle East (a region in south-west Asia).
Though the forex market became popular in the years of 1970s, but many research made us know that the exchange of money has been existing for a long.
In that year, it was recorded to be the first time America permit their currency to freely partake in the market exchange.
So to clarify this, it is the permission of the USA currency that made the forex market significantly known to the world by adding more value to it.
Although there is another valued currency in the forex market that provides support to exchanges, but it seems to be that the American currency tends to be more useful.
Let prove that:
If you are a forex trader, you will notice that major currencies always want to pair with the dollar. Why? In a general understanding, USD provide more differences when pairing with another currency, which is because of the high value it possesses.
For example, let take the pair GBPUSD
As we all know that this market will be volatile and easy to trade.
This is because GBP which is referred to as “Great British” Ponds has almost common value with the USD ( United State Dollar).
In this case, there is a high tendency that both pair of currency can interact by easily overtaking each other. I hope that simple to comprehend. Let move on!.
Since we’ve been talking about forex trading, now let fall back to the main subject. For you or any entrepreneur reading this post, there are some certain things you need to know about the forex market.
This may look normal or awkward to you but, it is necessary for you to obtain the knowledge of these things especially the capitalists reading this article. Let Read on!.
Core aiding things you are required to know about the forex market as an entrepreneur
Here, the core knowledge required for you to comprehend about FX market is highlighted and enlightened in this section.
1. Forex market occurs in two aspect
The exchange of currency can occur in two dimensions, it can either be done physically or online. Back in the days, FX traders often perform their exchange in an institution or between a group of individuals.
At that time, there was nothing like an online broker. All their operations are done physically by transporting ships that contain various value because of the absence of technology.
Although, some traders still presently perform the physical exchange. They either make use of their local banks or other financing institutions around them. But currently, we have a lot of online brokers that are working perfectly.
Who are brokers?
Brokers are either group of individuals or a firm that buys or sells for another in exchange for a commission.
They are the ones that make the FX market available to every individual at ease.
With an online broker, you can trade on forex without moving an inch from where you are. With the help of technology, all your trade (Buying and selling) will take place on your devices successfully.
In this case, you don’t need to visit any institution for the exchange of currency. As you can simply do it in the comfort of your home. Also for the capitalist there, you can also trade your business income from anywhere through your broker.
Note: Any successful trader must have gained enough knowledge and obtain valid experience about FX trading.
2. It involves mostly the exchange of money
In the FX market, we can trade a lot of things. For it does not only specify on money, but it can also be;
- Digital currency and so on
But the trading of normal currency seems to be common because of its frequent use.
For example, the EUR/USD show that the Euro and Dollar are to be traded. The trader either sells Europe and buy Dollar if the market will favour him/her. In this case, an exchange as occurred between the two currency.
Why people trade mostly on money?
What makes our normal often traded on forex is because of its simplicity and recognition in the face of traders. And also, our currency behaviour can easily be understood.
3. Forex market interprets the state of the economy
With the help of the FX market, we can easily determine the current condition of an economy. There is a way that FX gives a signal if an economy is down or up, as it also reflects in the value of the currency.
For example, if the graph of a currency in the FX market shows a downward reaction. That simply means that the country making use of that exact currency has an economic downfall.
But if the graph shows otherwise, then the economy is referred to be in a good state.
Also, we can know the state of our economy through the currency value in an FX market.
Let take this simple example:
If the rate of EUR/USD is 2.3490^53/2.1560^19 on the 1st of January 2021 and EUR/USD is then 14.4430^14/1.2236^90 on the 23 of August in the same year.
In this illustration, it shows that the value of the Dollar currency has devalued and an increase in the value of EURO has taken place.
So In this case, it simply tells us that the American economy is not in good status while Europe has experienced positive changes in theirs.
To conclude this sector, a capitalist can also use forex to determine the current state of his/ her business.
4. Forex market direction cannot be 100% predicted
In most cases, traders tend to brag about being fully sure of what a particular market will result in at a specific framed time.
The majority of them even go to the extent of not placing a stop loss or profit because they think they have successfully predicted the market. But to say the facts, traders that practice this always lose all their capital. That it!.
Why this is so
It is because the forex market cannot be fully predicted even if it is well studied. Hence, any trader must not place a market with full confidence. For it advisable that the implementation of stops loss/profit should be done when pacing a trade.
Reasons why the FX market be 100% predicted
The reasons why it can’t be fully determined is: Many factors constitute to the trend of a market, Which can be;
- Employment rate
- Productivity / Amount of labour
- Climate factor
- Natural forces e.t.c
With this, it will be hard for you to fully determined the posterity of the FX market. Though you can be correct sometimes, but it not advisable to fully depend on your predictions.
5. Forex market depends on our daily activities
What utters the trend of a market are the factors that constitute to it, one of them are the activities we performed daily.
What we indulge in every day will determine the future status of our economy, and this will directly project the value that your currency may attain. To make this understandable, our daily activities is the factor that makes the forex market the way it is.
Our activities can be in different aspects, it could be;
- Buying and selling
- Antisocial indulgence
- Personal service
- Impacting institutions, and a lot more.
Without the participation of our activities, there won’t be anything to trade on the FX market. There will neither be value of currency nor difference in commodity, for everything will be at a state of “equilibrium“.
At this Condition, the existence of the FX market won’t be required because it will be useless without this factor.
But if different activities are performed at large rate, there be abundant values that can be differentiated.
Also for business owners, their industry also takes part in the existence of the FX market because their industry occupies the involvement of different valuable activities that result in profitable output.
6. It can be volatile and nonvolatile
In the status of the Forex market, there are two constant things that happen. Which is, it is either the market is volatile (Active) or nonvolatile (Inactive), One out of the two must take place.
Meaning of volatile market?
This can be defined as the state when a market is very active and experiences wide changes in its direction. I.e It tends to be volatile.
While the nonvolatile market is directly opposite to the one explained above.
Example of a volatile market:
Let take a look at the pair trade of EUR/USD in differences of one hour
Beginning of 1 hour
In 30 minutes
At Complete 1 hour
With the illustration above, it shows that the price of the two currency is randomly deviating. Which means the current state of the market is volatile.
But if the prices experience a slow rate of change, then the FXMKT is referred to be nonvolatile.
Note: The analysis made above is just used for an ordinary example. The trend of the market can’t easily react to that extent for a 1hr
7. FX market experiences large turnover daily
The money that is obtained daily from FXMKT is of large quantities, which is due to the high number of trader that trades daily in the market.
What is turnover?
In the aspect of the business definition, it can be defined as the amount of time market goods and services is changed or updated for a new one if the old product has been exhausted (Sold).
With an estimated calculation, the FXMKT has over $1Trillion ($1000,000,000,0000) turnover at daily basis. Now, imagine how many shares each trader may obtain from this turnover.
In most cases, a forex partaker can earn 0.001 per cent from the share which is roughly about $1000 and still not affect the earnings of others. Though not all traders earn from the FX market, most time the inexpert participant tend to lose their trade.
8. The values of a currency utters the direction of trade-in FX market
There are different ways our money take part in market trend. For example, If the value of a currency is low, graphically, the trend of the market will indicate a downward direction.
But if otherwise, the graph will indicate an upward direction. Everything that takes place in the FKMKT depends on the things that it consists of.
As we all know that FX market does not only involve of our normal currency, for we have different multiple things to trade on as said earlier above in this article.
Before a specific direction of a market is displayed graphically on the broker platform, the currency always pairs with each other.
For example, when Dollar paired with the Japanese Yen ( USD/JPY ). And if their currency value is;
In their graph presentation, the trend of their market will be up. In this case, it clarifies that the value of currency affects the trend of FXMKT.
9.Forex market can multiply your business profit X2
For the entrepreneurs out there who don’t know about trading, am using this medium to create awareness that, extra money can be made from FX trade by you.
With the help of the current brokers that enable easy online trading, anybody can be an FX partaker even a kid of 10yrs can do better.
So for entrepreneurs, it will be very easy to make additional income from it. All that you need are;
- Standard training/ Good model
- A registered trading account on a broker
- Active demo account
- Trading capital. That all!.
How it works..
The moment you’ve created your account and it’s ready, you will be asked to deposit a specified amount of money into it. Once that is done, you can now place a trade depending on the amount of money you deposited to the brokers.
Note: If you placed the right trade, there will be income from the FX market. But if you place it wrong, there is a high tendency that you may lose your capital.
Popular brokers you can learn and start trading with
There are numerous brokers to trade with, which is both for entrepreneurs and individuals, but the best out of them are highlighted below;
- FX pro
- Metatrader 4/5
- Olympic trade
- IQ Option
With the help of the brokers listed above, you can easily learn and successfully trade on forex.
10. FX market cannot be controlled by an individual
As we all know that FXMKT possesses a very large extension that reaches almost all the country and continent we have in the world. That is, 80 per cent of the regions in the world take part in this market.
Now, imagine how large this could be. For this is not like the local institution where buying and selling take place but is another form of the market entirely.
The characteristics of FXMKT does not allow an individual or group of association to control its trends because it is not possible to.
As said earlier above, it depends on individuals, not an individual. This simply means that, each one of us and our activities controls the FX market, not a particular person.
It just like saying if a person can possess all the money contained in the world bank, which is not possible.
To say the fact, the Forex market is just like an entity that consists of different values. Meaning; there are lot of riches and values that can be obtained from it.
To conclude this, its everybody attached to what we do that also direct the trend of FXMKT but not that of an individual.
11. Trades are performed through an intermediary on FXMKT
For a successful trade to occur on the FX market, there has to be the presence of an intermediary that will act to be performable. Without them, it won’t be easy to trade.
Who are intermediaries on the Forex market?
These are brokers or firms that allows traders to import and export values on FX in an organized and protected way. They are also called “aggregation“.
These intermediaries are also known as brokers. Traders trade on FXMKT through the means their intermediaries provided for them, which can either be through their:
- Application and
It is this means that enable traders to have access to the FX market. For example, brokers like Olymptrade create both software and application for their traders to trade with.
With this, they act as an intermediary between the traders and the Forex market.
Advantage of Forex market
There some certain merit that the FXMKT possesses, the majority of them are listed below;
- Enable free exchange of values ( currency)
- It has a high volatility rate
- It is one of the most liquid markets we have in the world
- Create employment for traders
- Explains the current state of an economy
- Forex market boost the status of some firms and economy
Disadvantages of the FX market
Here, we will be looking at the demerit of the FX market
- Causes loss of capital
- Hard to predict
- It globally exposes the current situation of a country
- Forex market disappoint traders in most cases
- Forex influence the economy negatively in different aspect
1. Question: How does the Forex market affect my business?
Answer: The currency that your firm uses for operations and transactions is being traded on the FX market, which will either affect your business either positively or negatively
2. Questions: How long does it take to become a trader on the FX market?
Answer: To be a trader on FXMKT doe not take a lot of time, but it depends on the broker you are partnering with and the required capital for beginners you are asked to pay.
3. Question: How much can I earn from FX trading as an entrepreneur?
Answer: As a trader of FX, you can earn by an exchange of currency and predicts the right trend of the market.