The Forex Game: Starting With The Basics

Forex basics
Forex basics

Investing in forex is an activity, which allows anyone on Earth, who has access to the internet, to invest money in any stock market. However, it is not one of Earth’s hundreds of stock exchanges. It does not include physical buildings or legal statuses such as the London or Nasdaq stock exchanges.

The world forex is an abbreviation of the term “Foreign Exchange” and is typically used to describe trading in the foreign market by investors and speculators. In our days, one can invest in currency exchange rates and in other products (eg gold, oil), but also in shares of the largest companies in the world.

In the 1990s, only those with more than $10 million could invest in forex and could only invest in exchange rates. Today one can invest with just €100 initial capital (or in some cases even less) in financial products besides the exchange rate of currencies.

The Forex Basics: A network consisting of

1) Investors, located in different parts of the Earth, have access to the internet.

2) The various stock exchanges of the world.

3) The banks, which undertake to fulfill the wishes of the investors in the various stock exchanges of the world, ie to buy or sell what the investors want

4) Brokers, are those who bring investors in contact with the various banks. Brokers use a website to contact their member banks and investors. That is why any person on Earth can connect to a broker via the internet and use it to trade in the exchange rates of currencies, oil, and gold but also in shares of large companies.

The profits that one can make through investing in forex can be huge, even with small amounts e.g. with €500 one has the opportunity with the leverage method to invest up to €50.000 (leverage x100) with the consequence that if he has only 10% profit percentage, he can win up to €5000 from a transaction with an initial capital of €500. Of course, this profit comes with undertaking the corresponding risk, because if there is a drop in price by 10% then the loss will be up to €1000. Beware that these are interrelated.

There are platforms where the cost of forex trading is negligible. In particular, brokers usually do not charge their members any commission or registration fee. Their profits come from the difference between the purchase price and the selling price (ie the spread) that a product or a stock trades when the investor opens a position. In this way, forex gets paid through the spread differences instead of charging high commissions compared to other investing platforms, making it a very attractive way of investing. 

Breaking Down The FOREX Game

To put it bluntly, while the New York Stock Exchange has a daily trading volume of about $ 20 billion, forex for its part has more than $ 3 trillion, which is 150 times the daily trading volume of the world’s largest stock exchange. New York. As a result, forex is not controlled by anyone.

To be able to invest through forex you need to register on a broker’s website. Of course, the broker must be reliable and provide the opportunity for its members to invest in the products they want. Beware, not all brokers offer the same things to their members. Others e.g. offer only currency exchange transactions, others offer investments in stocks or gold or oil, or other commodities. However, one can make a search on which broker to go with before deciding to invest in forex. Despite all the advantages, there are platforms that charge high amount of fees when using leverage.

Forex Technical Analysis
Forex Technical Analysis

The two main ways of analyzing forex investments

Fundamental Analysis

By fundamental analysis we mean the analysis and evaluation of all the elements that can affect the price of the product or the stock we want to invest in.

E.g. Let’s say I want to invest in oil because I believe its price will rise. My opinion that the price of oil will rise is based somewhere. Fundamental analysis includes learning about all the things that can affect the price of oil (Gulf War, declining world production, decrease in the production of a country, increase in demand due to bad weather or due to the development of some countries, change of interest rates, etc.), but most importantly in analyzing and understanding them correctly. Obviously, fundamental analysis takes a lot of time (to read about all the facts that can affect prices) learning about commodities economics, and of course money (buying the right resources, access to blogs, newspapers, and magazines)

Technical Analysis

By technical analysis, we mean the monitoring with statistical charts, of the price behavior. At this point, the investor tries to analyze the graph of a stock based on the prices of the past, to guess the future price (ie if there will be an increase or a decrease) in order to position themselves properly. Apparently, technical analysis requires specialized knowledge so that one can accurately predict future prices.

Think about the following as friendly advice if you are thinking of trying investing in FOREX

If you decide to invest in FOREX, you should sit down and study very well everything about digital investments so that you can assess the different situations and be in a position of understanding the pros and cons, to minimize your losses. Signing up for a subscription site, which will tell you where to invest and what exactly to do, does not sound like a good option. You need to have your own judgment in order to become a great trader and take your own decisions which at the end of the day will impact your own pocket. Be careful and do not take the bite of the easy money and remember… Money does not come easy!

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