Forex Trading for Beginners #1: What is Forex trading and How Does it Work

Okay so in this video you will study what. is foreign currency trading and how does it work so. what exactly is Forex. so for X stands for overseas exchange. right fo r goes with foreign and e^x is. exchanged so whenever you hear that some. foreign exchange you are mainly referring to. international trade so forex trading is. merely the buying and selling of one foreign money for. another right so that is one thing that. I would say 99% of us have at least one. point in time right dabble in foreign exchange may. not be you understand electronically know. the place you’re going alongside one shot but. bodily when you let’s say you’re. going for a holiday for instance I’m in. Singapore and I’m going to Malaysia for. a holiday so if I wish to go to Malaysia. for a vacation I have to spend Malaysian. Ringgit in Malaysia proper should you go to. us for vacation you spend USD in u.s. so. to be able to get Malaysian Ringgit I want.

To sell my Singapore dollars for. Malaysian Ringgit so this is one form of. forex trading proper you’re selling your. own domestic foreign money for overseas. currency so you can spend the currency. in the foreign country that you’re. visiting. so this could be a one form of forex trading. so who treats for x and y so foreign exchange is. largely deal with by your banks like central. banks banks companies and retail. merchants so just let me briefly explain. to you you understand why they get entangled in. the forex market so for central bank is. normally meant to intervene the FX. markets maybe you realize their currency. is appreciating too much and so they need. you understand stay competitive for the. export so central financial institution can intervene in. the FX market for example in 2012 you. have the Swiss franc proper back towards. the euro as a result of the Swiss frame was.

Appreciating too much in opposition to the euro. in a central financial institution intervened influence the. euro at one point too so this is an. example of the Adonis central financial institution. intervening in the FX markets then you. have banks purple line Oh deutsche bank. Goldman Sachs. HSBC is right where they’re mainly. they commerce Forex but as a type of market. making to offer liquidity to. corporations and as well as they do to. hedge their their their guide proper in. case you’ve any currency. he is right these banks would also you. know trade the foreign currency trading foreign exchange. market however the things I want to point. out is no banks and companies they. have close working relationship because. for cooperations for firms right. for example for instance you you are a automotive. maker for example I’m a Toyota proper I. manufacture vehicles but the factor is that. my automobile spare components I’m not found in.

Japan I could have to go to countries like. possibly China or India to source for this. spare elements so if I’m the car maker to. Europe. all right and I need to purchase these spare. elements or quite to buy the uncooked materials. for to manufacture my car I have to get. them in the overseas nation so what I’ll. do is that I will sell my own country. Japanese yen for say the Indian rupee. right so I received the Indian rupee and I. can go to India and by the related. supplies that I need so this is one other. type of our forex trading for. corporations the place they typically no. sell their very own domestic foreign money right. and in exchange for a overseas forex. to purchase in or whatever relevant spare. half. extra materials that they want so this is. you know the way companies are you realize. dabble within the FX market as well proper. in addition they dabble in the FX market so we.

Know H no matter positions that you have. there could be no exposed to foreign money. threat and last however not least you may have the. retail traders like me and you who. speculates within the forex market right . to earn a profit right no and and this. is something new and I consider that is. the reason why you are watching this. video right now to learn how to commerce. the forex market so this is where retail. traders come in so one factor to note. proper I want to share with you the. hierarchy right so it’s recognized that is. the map let me share with you the how. how it all works on this ecosystem so. you can see what your central financial institution are. the largest proper over here after which. they adopted by Tall this a serious banks. like no whole comon JP Morgan and. whatsoever so all these major banks they. have relations with you understand investment.

Funds industrial company like no Toyota. Cadbury stuff like that or maybe you. know CH funds and and who desires to you. know trade in the FX market so all these. banks ready typically we have. connections to industrial corporations and. you realize giant funds or final Speculator. and on top of it proper additionally they have. connections to market maker right right. where. you’d deal with out of your dealer ITF. connections to your dealer proper okay. market maker or ECM broker and stuff. like that so from then on proper that is. the place your personal broker have connection to. you the retail trader by way of their very own. buying and selling platform so this is how the. ecosystem work proper no banks would. talk with your own retail brokers. commercial companies or investment funds. proper that’s one thing that they’ll. dabble in all three classes proper for.

The banks all right some of them could. simply select to give attention to funding funds. some to simply focus just on commercials. company or perhaps some you know are you capable to. know have dealings with all three. totally different classes okay so but you as. the retail dealer you solely have you understand. entry with the connection with the. market maker who then you understand might. cross in your order to the bank. connection instantly may or might not. relying on you realize what relying on. how your broker established your owner. the buying and selling system okay so with that. stated proper this can be a the ecosystem and. to take a glance at a hierarchy proper this is a. source from possibly pits right you can see. that main banks they’re the top proper. they cope with essentially the most number of I mean. they put within the largest orders proper. Andy typically you realize talk with.

One another utilizing this system proper the. EBS system okay and then uh. additional down the food chain is the place you. have you know your retail market makers. proper you understand the brokers the EC ends. proper and this one over here they put it. a hedge funds and industrial corporations. on the same degree but to me I would say. this group of merchants are usually one. degree above a retail buying and selling proper I. would say somewhere around here where. this hedge funds and commercial. firms and final however not least is. retail merchants like you know you and me. who trades the FX market so this is the. meals chain right it’s a fact right so. this is why you know retail merchants. right you don’t move the market markets. I usually transfer by the big gamers which. I shared with you over right here proper at the. prime of the food chain so transferring on what.

Are the advantages of forex trading. proper primary excessive liquidity proper so. everytime you put in an order into the. forex market you do not have to worry. about you understand getting a full value or. sleep pages as a end result of there’s normally a. huge amount of liquidity and you fairly. a lot me to enter really lunch lot sizes. to even transfer the market so you do not. have to worry about nowhere. you get crammed or not chances are you. know when you hit the market you pretty. a lot get a price which is close to you. know what you see in your display screen. second thing is low barrier to entry so. this means that now anybody are you able to join. or deal with the forex market proper until. your your nation sort of like been. forex trading but when not proper what’s. there to cease you from you understand opening. an online account proper and just some. another needed paperwork and you may.

You know be buying and selling Forex that is a factor. is a greater risk administration why I say. it’s because Forex allows you to. trade you know very small lot sizes. right you can commerce after you understand micro. lot and even they know lot it is a. actually small lot sizes that allows you. to raised manage your danger you understand. in distinction to stocks proper like for example you. purchase say a one share of a blue chip inventory. in Singapore I even have to buy at least one. lot proper there was I suppose someday. again in Singapore by one lot of shares. is at least 1000 shares so if your. account size is just too small you’ll find a way to’t even. purchase one lot of shares in Singapore so. compared to 4x right. you have higher threat administration as a result of. they allow you to commerce actually actually really. small sizes after which you haven’t any trait. anytime you want 4x is you understand dealer. twenty 4 or five proper Monday to.

Friday so you understand you’ll be able to wake up in. the asian session put in an order manage. your trade or within the London session in. the New York session you possibly can pretty much. you realize trick anytime you want proper. in contrast to the inventory markets the place it is. normally open for you realize eight hours a. day proper in the course of the doing the. respective time zone that you just’re. training it the actual inventory market. and one last item is know forex trading. you could have low transaction prices proper so. in Singapore I once more again to to. reference again to Singapore everytime you. know I buy say shares all right the. minimum transaction value to purchase is $25. and after I promote is another $25 so one. factor about foreign forex trading is that there. is not any transaction value you solely usually. pay the unfold okay you may pay. transaction prices depending how your. dealer want to cost you however usually.

Right you don’t have to pay transaction. value in forex trading you just pay the. unfold so if you think about this right. in singapore for example i buy some shares. had been for let’s say five hundred dollars. okay and one buys is $25 one cell is $25. so before you understand that see let’s right here. when i purchase the share worth $25 so $500. value right let me just. get it all the method down to type of show what I mean. so for example proper I wish to purchase $500. price of shares right you understand that. transaction value sometimes in Singapore. is 25 bucks so 25 divided by 500 when I. purchase the shares this is equivalent to. 5 p.c right so I’m actually down. five % even before the market I. mean even earlier than you understand the moment I. placed on the commerce I’m really down 5. percent and that is nonetheless taking into. consideration the unfold on the trip.

That I’ve paid right I’ve not included. it right here however for simplicity sake what I’m. attempting to say is that whenever you trade. shares in case you have a smaller come or. somewhat you are shopping for a small number of. shares a small nominal value that fastened. transaction prices will into an enormous. share of your returns so for this. right you ready down 5% from the beginning. for stocks. whereas for Forex proper you do not have. this uh you don’t have this socalled. transaction price you solely pay the unfold. which is one thing that we will speak. about later so this is certainly one of the. benefits of you understand forex trading as. well so only a quick recap right forex. trading forex trading is the trade of. you understand currencies proper it is traded by. banks firms and retail traders. such as you and me and the advantages of it. is you realize it has high liquidity low.