What is Forex Trading
Forex trading is one of the largest forms of financial investment in the
world. The reason people join forex trading is to make a profit and as part
of international trade.
Forex is a foreign exchange or buying and selling foreign exchange that
makes people get a lot of profit from the movement of foreign currency
exchange rates. Forex trading is certainly done online.
Forex Advantage
Quoted from duwitmu.com, the value of stock trading transactions on the
NYSE, Nasdaq and Tokyo combined amounts to $300 billion per day. Compared to
forex per day can reach US $ 6.6 Trillion (according to Bank International
Settlements). This value shows many times higher than stock transactions.
Reasons to Choose Forex
1. Progress of Globalization
The development of globalization supported by advanced technology
facilitates international trade transactions around the world. The existence
of this globalization encourages forex trading to soar.
2. Very Liquid
It is called high volatility because the transaction value in the forex
market is quite large. Generally in the forex market, there are several
parties involved in trading. Among them:
Government. Foreign exchange is needed to pay debts, receive loans, and
other needs.
corporation. Generally, exports and imports by corporations require foreign
exchange in their trading activities.
Investors. Buying and selling foreign exchange aims as a form of investment
to seek big profits.
Usually liquid markets attract a lot of investors because they can buy and
sell currencies easily.
3. Achieving Wealth
If you want to make a quick profit, apart from the stock market, of course,
you can try the forex market.
Why? The first is leverage, where you can
trade in large amounts with small capital.
Second, high volatility where in
the forex market you get the opportunity to make a lot of profit. But
remember, high risk high return yes.
4. Plenty of Time for Transactions
In the stock market it is usually limited from 9 am to 4 pm. Saturday and
Sunday off.
Well, in the forex market the advantage is that trading is open
24 hours, you know and doesn't know holidays. Interesting right?
5. Trading Positions
In the stock market, the first thing you have to do is place a buy position,
then second you can only place a sell position. The point is you can't sell
shares if you don't own the shares.
In contrast to forex, you can place buy
and sell positions at the same time without having to own the goods, such as
stocks. Buy and sell positions in forex can certainly give you a bigger
profit.
6. Only Need A Little Capital
Capital to enter the world of forex can be said to be small or relatively
affordable, but has a large buying power of investment.
For example, you
only need $25 to make $1000 worth of forex transactions.
Forex vs Stocks
1. Transaction Party
In the stock market, transactions occur centrally on the stock exchange
between you, the broker, and the stock exchange. In forex, transactions are
Over the Counter (OTC) between you and the broker.
In the stock market
transactions occur on one exchange, in forex there is no exchange party.
This makes the broker's role very central.
2. Stock and Forex Positions
In stock, the stock is kept in custody. Shares prove ownership of a company.
So you can say there are items you have. In forex, of course, it's
different. Profit and loss depends on your position.
For example, when you
close a position, you only see the price difference and pay or receive the
difference.
How to Trade Forex
Open Buy
In this position you expect the value of the Euro to be stronger than the
USD. For example, you buy 1.1215 (100,000 Euro) and get US$ 112,150. Then
the Euro becomes 1.1315 so that the value of US $ you get becomes US $
113,150.
From the example above, for example, you buy at 1.1215 then the EUR/USD
strengthens to 1.1216 (need additional USD to buy 1 Euro).
If the EUR/USD
exchange rate strengthens, then realize your profit by closing the position
and making a close buy.
Open Sell
In this position, you expect the value of the Euro to weaken against the
USD. From the example in number 1, for example, you buy at 1.1215 and the
Eur/USD exchange rate weakens to 1.1211.
This means you need less USD to buy
1 Euro. If it has weakened, you can realize the profit by closing the
position and making a close sell.
In essence, you may need more knowledge to learn the world of forex and risk
management. Of course, to enter the forex market, it is recommended that you
use cold money. Remember all investments have risks.
