Economy | Investing in Forex: how to do it?

Every year many people around the world decide to venture into the world of trading. Forex, also called the currency market, is the one that most attracts these new self-made men. So what is Forex?

Forex: definition

Forex, often abbreviated as FX, is the market where currency exchange takes place. The term comes from the English Foreign exchange market which means foreign exchange market.

The Forex was born at the beginning of the 1970s. It is the consequence of the end of the fixed exchange rate of other currencies against the dollar. Since 1973, many investors have flocked to this new market by betting on the rise or fall of certain currencies.

According to the BIS (Bank for International Settlements), the currency market is the second largest by volume in the financial market. It is nevertheless the first in exchanged liquidity.

Thus, according to the BIS, 6,595 billion dollars were traded on average per day in 2019. Half of the amount concerns FX SWAPS, i.e. 3,203 billion $. The rest is shared between cash or spot transactions ($1,987 billion) and futures contracts and other financial instruments ($999 billion).

Forex, how to enter the foreign exchange market

With the financial volume traded every day, Forex is therefore a big market. It is best known for being very decentralized. But it is the place of London which concentrates the biggest volume of the exchanges. In fact, just under 55% of operations are carried out there. The United States places come in second place with around 21%.

Paris in France, with its less than 3% represents the third place. It should nevertheless be noted that for several years, East Asia has begun to occupy an important place in terms of the volume of transactions. Indeed, nearly 20% of these are now concentrated in this area.

But above all, you can invest in the currency market, regardless of your continent. As such, whether it is the countries of Africa, South America, etc., digital tools help to bet on the rise or fall of this or that currency.

However, one does not integrate the Forex without having certain notions. Taking online trading training is the only way to quickly learn the basics of this booming sector.

Currencies that are popular in the foreign exchange market

Not all currencies have the same value in Forex. But it is important to know as a beginner that currencies are quoted in pairs. Formerly EUR/USD. These pairs are ranked according to the importance of the traded volume.

We distinguish in this respect:

• major currency pairs;
• minor currency pairs;
• exotic currency pairs;
• regional currency pairs.

The currencies which are the object of the most operation are the US dollar which represents more than 85% of trade. The Euro comes in second position then follows the Japanese Yen. These currencies are part of the major currencies in addition to the pound sterling.

But as you will have noticed, it is possible to trade on many other currencies. Indeed, the choice to bet on the fall or rise of a particular currency depends on the motivation of the trader.

On the market, however, the currencies that are most used in investments and therefore are easily exchanged are:

• the US dollar (USD);
• the Japanese yen (JPY);
• the British pound (GBP);
• the Swiss franc (CHF);
• the Norwegian krone (NOK);
• etc.

Conclusion

The Forex market is a very large market, but largely dominated by the US dollar. This market is accessible from any corner of the globe if one has the necessary digital tools. But, before any attempt to trade on a market where the risks of losing money are as enormous as the chances of winning, it is important to follow a good training.

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