Forex - Toroinvest

Toroinvest will present you with crucial info about forex, how it works, a little bit of history and will walk you through some advantages and disadvantages of forex trading.

What is forex?

The term forex combines two words in itself: foreign and exchange. Forex is the trading of one currency for another and at the same time is the place where the transactions happen. It is the market where the different currencies are traded

The forex market is the largest and the most liquid one worldwide, it is even bigger than the stock market. The daily volume is around 6.6 trillion USD. On this market people and institutions are trading currencies against each other as exchange rate pairs. On forex you can find around 180 official currencies, but a major part of the trades happens with the following ones: U.S. dollar, Euro, British pound, Japanese yen. In terms of popularity, the Australian dollar, the Canadian dollar and the N. Zealand dollar follow. Swiss Franc is within the list of the popular currencies as well.

It is essential to know that Forex does not have only one address or just one centralized location. The market of currencies consists of a complex global network of institutions, like banks and brokers. That is why forex is on 24/5 except holidays.

When forex started?

In the seventies the floating exchange rates gradually overcame the traditional monetary management system with fixed exchange rates. Since then, forex trading has grown exponentially, and now there are various types of it. Toroinvest will guide you through some of them.

Spot transactions

A spot transaction is a direct exchange of two currencies. No interest is charged, and there is a two-day delivery period. The forex brokers charge a small swap fee when they suggest rolling over an expiring transaction into an identical transaction.

Forward transactions

In a forward transaction, the buyer and the seller agree on an exchange rate, and the exchange happens on a fixed date in the future. In contrast with the futures, this type of contract is tailor-made.

Futures

They are a standardized type of forward contracts, include interest, and are traded on an exchange. The futures set a date and volume of currency that will be exchanged. These contracts are used to hedge currency positions by multinational corporations.

The advantages and the disadvantages of forex
The advantages: easy to enter, high liquidity, and almost non-stop working time

Most of the brokers are making their profit through currency spreads. The fluctuations are a common thing, so there are a lot of trading opportunities. Especially when talking about major pairs. On top of that, forex is open 24/5, so you can hop in and place a trade whatever time it is. So, there is no surprise that a lot of people are going for forex. But here is what you need to know.

The disadvantages: hard to forecast, extremely dangerous when leverage is used and a real maturity test

Forex trading is a real school of life because it teaches selfcontrol. It is a great online trading teacher in general. Forex is hard to predict and to analyze even with the top-notch tools for technical analysis. Please be advised that there is always a possibility to lose part or even all of the investment due to extreme volatility and high leverage. This market is exposed to political, economic, and social events. In an interconnected world, one has a real hard time making a long-term forecast for the value of a currency. That is why most of the traders go for day-trading of currencies which requires real perseverance.