Beginners Guide to Online Money Trading
In nearly every aspect in our lives, money is a necessity. Regardless of the type of trade or business you wish to perform, you’ll require money to do it. When we talk about foreign trade and business, currency exchange becomes important. For instance, a German company wishes to buy some goods from China, or a British tourist would like to visit India. This is where the Forex comes in, a market where you can exchange one currency for another.
What is Forex?
Forex, or the Foreign Exchange Market, also called FX, is the global currency trading market. True to April 2016, the average daily turnover in global foreign exchange markets is an estimated at $5.09 trillion! This trading includes all aspects of buying, selling and exchange of currencies.
History of Forex Trading
In 1876, international economist wanted to stabilize the currencies of the world. They decided to peg the currencies to the price of gold, and used the term Gold Exchange Standard for this idea. According to their plan, solid gold would support all paper currency. Whilst a good theory initially, it ultimately led to the downfall of gold standard around World War II, and major European countries did not have enough gold left to support their paper currency.
In 1944, another system was introduced, the Bretton Woods System. They decided to have fixed exchange rates, and use US Dollar only to support gold. This system came to an end in 1971, and in 1976, The Foreign Exchange Market was born.
The main participants in this market are:
- Banks carry out commercial Forex transactions and are involved in a large amount of speculative trading every day.
- Corporate Companies use Forex to pay for goods and services obtained from foreign countries.
- Governments’ central banks plays an important role in Foreign Exchange Market. They can control the money supply, inflation, and interest rates, and use foreign exchange reserves to stabilize the market.
- Individuals such as Tourists need to get money exchanged from Forex.
- Investors use Forex to carry out transactions in foreign securities.
- Retail Forex Traders access the Forex market through a bank or a broker. There are two types of Forex brokers: brokers, and dealers. They help the trader by trying to find the best price and receive commissions on the market price.
How Forex Works
You can make a lot of money with Forex, if you do your required homework first. How does it work? To summarize the basics, we look at the Forex quotes and find two different prices; the buying price or the Ask Price, and the is Bid Price or selling price. The Ask Price is always higher than the Bid Price. If you think the value of desired currency will rise, hit the Buy button. When it does rise, sell it to make a profit.
There are a number of international Financial Centers who serve as anchors of trading between a wide range of buyers and sellers from the world. The market is open 24 hours a day, 5 days a week, with some specific country’s markets being open during weekend days as well. The most important trading centers in the world are in London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris, and Sydney.
Now that you have the very basics of money trading down, it’s time to head over and open an account on GSI Markets. We will go through more in-depth information in the following articles, and you will soon know everything you need to in order to make a profit!