Unfortunately, the type of trade based on buying and selling different currencies at the exchange rate that we follow closely as a country is called forex. In this type of trade, known as the over-the-counter market, it is quite possible to sink or exit. Let’s take a closer look at what Forex is and see its risks.
At the beginning of our article, let’s say that you should not consider any information you read here as investment advice. Unfortunately, we are all very interested in the incredible changes in the exchange rate, especially in the last year. During currency exchange, everyone thinks that someone is making money on these exchanges. That’s right, money can even be made by buying and selling different currencies. This type of trade is called forex.
With Forex, it is possible to make money quickly or to lose money quickly. because the value of the currencies of the countries against each other There are many different factors that decrease and increase it. Even with some ground rules, sinks and slides can be really dangerous, as the so-called over-the-counter forex trading is generally considered uncontrollable. Bride what is forex Let’s take a closer look and see the risks that may come your way.
What is Forex?
Used as an abbreviation for Foreign Exchange, forex refers to the conversion of two different currencies to each other. So in simpler terms, trading of different currencies. It is considered the over-the-counter market. Because unlike single-center transactions such as the stock market, even exchanging a few dollars on a corner is a forex transaction.
The working principle of forex trading is based on the buying and selling of currencies against other currencies. Of course, the transactions carried out depending on some local and international rules however, since it is a market that is difficult to control, these rules are often set by a temporary agreement between the buyer and the seller.
How to invest in Forex?
At a Forex service provider or bank where you already work You can start by opening a new foreign exchange account. By purchasing a certain amount of currency, keep track of the increase and decrease in the value of that currency. If it becomes more valuable than the amount you bought, sell it and make a profit. This is the basis of forex trading.
Of course, forex investments can consist of broad trades that we can’t even imagine. Take coin A, convert it to coin B, take some C and then Profit from money B by buying A and C Different transactions, such as, are indispensable in the forex market. We are not aware of the fact that we are stuck between the Turkish Lira, the US Dollar and the Euro, but since almost every country in the world has its own currency, there is no limit to forex transactions.
Forex transactions are evaluated on currency pairs bought and sold. Major currency pairs we all know, one major currency pair and one smaller currency pair, major currency and developing country currency pair, Trading on fundamental pairs, such as different currency pairs of similar countries, forms the basis of forex trading.
Forex market types:
- Spot forex market
- Futures forex market
- Future forex market
The first and most common type of forex market is called the spot forex market. In the spot market, transactions are fast, instant and on point. The best example of this is exchange offices. You go, give the money you have and get what is the equivalent in a different currency. In the spot market, transactions are made in physical currencies.
A forward-dated agreement is made in the futures forex market. Buyer and seller, on a certain date the buyer will receive a certain amount of currency in exchange for a certain amount They make a deal on it. Similarly, such a contract can be made for a future sale.
In the forex futures market, the agreement between the buyer and the seller is often not legally binding. Future forex market In the market type, which is called the market type, this contract made with a future date is legally binding and one of the parties may face legal actions if they act against the rules in the contract.
What are the changes in the Forex market?
As we all know, changes in foreign exchange prices can be very destructive at once. One of the many different reasons for these changes, which directly affect the forex markets, countries’ central banks. Changes are observed in the forex market due to the operations of the central banks, which are officially authorized to issue and withdraw different currencies to the market.
Adverse events in a country also affect the forex market because commercial banks or other commercial investors They don’t invest money in a country they don’t trust. A similar situation is experienced in the credit rating of the country. The lower the credit score of international organizations that give credit scores to countries, the lower the reliability of that country. Foreign investors do not come to an unreliable country.
Of course, it affects the currency of that country and therefore the forex markets. The most important factor is the economic structure of that country. Because investors look at long-term stability, not instantaneously increasing or decreasing values. If a country’s currency is too low one day and too high the next, an investor neither invests in that country nor trades in that country’s currency.
Some terms used frequently in the Forex market and their meanings:
- The value of the first of the currency pair traded is the base currency.
- The value of the second of the currency pair traded is the counter currency.
- The difference between the buy and sell value of a currency is called the spread.
- In general, 100 thousand currency units are called lots.
- Trading a specific deposit without paying the full value is called leverage.
- The deposit paid to open a leveraged position is called margin.
- The exchange value of the currency in the fourth tens digit is called the pip.
Is it possible to make money with Forex?
Of course, it is possible to make money in a market with so many participants all over the world. It is known that the world forex market turns 5.5 trillion dollars a day. So it’s a pretty big market. However, if someone wins, someone loses, and we all know that those who trade with a few thousand dollars are often the losers, not the big investors who trade with a few million dollars.
Forex is not a market where you can say I bought a few dollars and see what happens. There are experts in this subject, they have training and even just by consulting this business There are people who make money. So it’s a somewhat complex market. But do not be afraid. Just make sure that you do a good research before trading in this and similar markets, that you will not lose all the sustenance of your children and the size of the risk you take.
A market type consisting of buying and selling transactions of different currencies. what is forex We answered the question and talked about the details you need to know about this market. Let us remind you again that what we have told is for informational purposes only and is never an investment advice.