Most individuals — even those who trade a few times a week — are, by the IRS’s definition, investors. The currency market became the way we see it now after 1973 when the EU member states abandoned the fixed exchange rate. Leading market currencies include the US dollar, British pound sterling, Euro, Swiss franc and Japanese yen.
In addition to the main currencies, several dealing centers offer customers the Canadian and Australian dollars, the Swedish and Norwegian kroner, etc. trade.
Forex cannot be called a market in a strict sense. It does not have a specific trading location; trading can take place by the phone or electronic terminal. It works around the clock throughout the workweek. Be sure some dealers want to buy or sell a particular currency at every moment of the day in a particular corner of the globe. The world’s leading exchanges open with a change of time zones, from Wellington to South Africa.
The undoubted advantage of the Forex market is the margin trade principle. The essence of this principle is that a client is given leverage of 50, 100, or sometimes more than a person’s funds, to complete trading operations. Thus, a market participant with even small sums can make very solid transactions.
Fundamental Forex Factors
The composition of the foreign exchange market is diverse. It involves banks, international corporations, broker offices, small firms, and private investors. However, the decisive factor for price movement is the actions of leading world states. The main constituent factors include economic development, domestic and foreign policy, actions of central bank management bodies. News of an economic and political nature can affect the exchange rate of the national currency of a country sometimes even within a few minutes.
When it comes to online trading, it means the ability to make transactions with all types of assets (currencies, stocks, metals, cryptocurrencies, bonds, futures and others) on various OTC platforms and exchanges (Forex, stock, and commodity) through the network using special software for this. The main pros of online trading are:
- speed of operation;
- speed of the decision on the purchase/sale implementation;
- convenience in obtaining information and processing a transaction.
Forex trading, as a rule, attracts new market participants by the fact that this approach uses short-term market movements, which are primarily striking. In addition to this, a lot of people are attracted by an external background — advertisement on the Internet. However, there are other approaches, and they also have their own pros for many parties.
Investing as an Alternative to Trading
When investing, small short-term and medium-term fluctuations in the stock market are completely ignored, while global long-term movements are exploited, which are formed due to the progressive development of the companies’ business and increase in their finance indicators. At the same time, these are truly global trends for companies that can last for years.
This approach is perfect for busy people who cannot devote constant attention to working in the stock market and spend a lot of time on it. If trading absorbs almost all the time of the trader, then investing can be successfully combined with other activities since this is a passive process. If there is loud and promising advertising that attracts many people on the side of ForexTime, then there is the real successful practice of the richest people on our planet on the investment side.
Investing is not just a different approach from trading, but also other tools that are used by bidders. The basis of the investment is the understanding that a stock is a share of ownership in a company. Accordingly, when buying a share, you become co-owner of a particular business. And the stock price of any stock essentially reflects the market value of the business. If a company grows and develops, then its fair value also grows, that is, the company becomes more expensive and sooner or later it is reflected in stock prices. Therefore, the main idea of investing is to find companies that are an undervalued market and (or) have a high potential for business growth.
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