Forex trading has started to appeal to more clients each day, especially the ones who would never even assume to find themselves in the business of market trading. So, what are the reasons for it? First off, it is quite important to note that there isn’t a sure-fire way to get rich and do it fast in any business, especially the Forex trading. Namely, there is no point in trying to cheat the system, since that would take all the appeals from it, anyway, right?
Look at it like this - the only chance you can possibly have to get profits easily and without a hassle on the Forex market is to either have a safety net in the form of several million dollars to spare or to be unusually skillful without ever making a mistake. So, you get the idea. Rather, what you can definitely do is work on developing your own trading skills, as well as do a deep dive into the market until you find the asset that you will be most comfortable with.
Lately, the experts on the market have been showing how Forex trading is the most common choice for retail traders. Namely, the entire process is quite simple - you have your asset and your broker, you make a deposit through them and you are good to go. Another good thing about retail accounts is that you can decide on practically everything that has to do with it - from the amount you are willing to invest, to the position you are choosing to hold.
Another thing that pops up pretty early on is the fact that retail brokers also have a widely complex structure of the fees and commissions that they have to deal with. Although, you should note that they defer from one trading platform to another, so it would be helpful to research that as well.
Here is a simple example of a fee that a lot of trading companies require from their clients. Imagine you haven’t been around on the trading market for a while. You’ve been busy, work has been tough, and you had a lot of chores to deal with on top of that… simply, you didn’t have the time to revisit your account. So, the next time you log in, you may find a part of funds missing from it! Still, not to worry - your funds are completely safe. This is called an inactivity fee, and it should be explained in detail on the website of the trading company you are engaging with.
What About the Volatility?
As you probably already heard a bunch of times before, currency trading is highly volatile. But it comes with the territory, right? Namely, since the Forex market is the most liquid one in the world, it is quite understandable that it would be a center of a lot of excitement and changes.
The high volatility of the global currencies can tell you quite a lot about them and the entire experience of trading, as well. If you think about it, high volatility leads to a higher profit. In addition, despite this feature, you can also find many currencies that have lower volatility and are even considered safe-haven assets. The point is, things can easily change in a blink of an eye, and once an uncertain asset can become your safe harbor, and vice versa.
A Brief History of Forex
In order to better explain to you how the Forex market has become such an alluring phenomenon, let’s take a quick look down the memory lane, shall we?
Forex is a fairly new market that just started to catch the attention of a broader audience a few years ago. Still, if you look further into it, you can notice that there were traces of its origin way back in the old ages. Nevertheless, we can say with certainty that the currencies and their exchanges are as old as nations themselves.
The Forex market started to thrive especially after 1971. Why is this year crucial? Namely, this was the year when the Bretton Woods monetary system was put out of use. Within this system, which was established back at the end of World War II, the countries were only able to print as much money as they can cover in their gold reserves.
This system was functioning for quite a long time, especially after the bad taste of the Great Depression remained in everyone’s minds. Therefore, Bretton Woods made sure that this does not happen again, by making sure that the countries’ monetary policies are always stable.
So, What Happened?
The thing about consumerism is - the more you have, the more you need. As luxurious things such as cars and houses became more approachable to the general population, the standard started to go up, and more and more people wanted to make their lives better. And, why not?
As a result, the Bretton Woods Agreement was not enough to satisfy the fast pace that the money started to follow, and it had to be removed altogether. And though many things have improved since then, the possibilities for a deeper and more complex and prolonged recession are much more visible, as we can witness ourselves today.
Types of Markets
The experts can agree that there are 3 large types of markets, within you can put practically any type of trading possible today. Those are:
This is a place when you can trade assets such as commodities, currencies, and securities. They are traded in a way that the execution is done immediately, hence the name - spot market. Furthermore, you can also hear other terms being used for the spot market - such as the cash market or the physical market. The main point is, that the trades are happening right now, while the delivery and transfer of the funds are done by a certain date decided by the parties.
The forwards market is a market where you cannot trade currencies. Still, it is worth mentioning because they actually only deal with the contracts that are representing the value and the state of a particular currency. So, as you can see, the currencies are still very much involved here.
And finally, the futures market is a place where you can buy and sell based on a previously arranged standard size and settlement date for a certain commodity. The thing about the futures market is that each detail is carefully explained and proposed before the process of trading can take place. This includes the number of units being traded, delivery and settlement dates, as well as exchange rates.
To conclude, we cannot tell you there is a particular way to get rich when trading on the Forex market. That’s simply not how trading works! Rather, you try times and times again, until something fits into your trading strategy perfectly and takes you where you need to go. This may take a while, too - so you should keep it in mind, especially when things get rough.