Forex has been the largest currency market in the world for many decades. In this market, the exchange rate and the price of the commodity are formed on the basis of supply and demand levels. On special trading platforms, transfer of monetary resources and the exchange of currencies occurs instantly.
The price of Forex is formed by demand and supply
A question arises, "Who sets prices in the foreign exchange market?" The answer is simple enough: the price is automatically formed by demand and supply; there is no specific structure for these fluctuations. If demand at the current price is higher than supply, the price will rise until the situation changes and vice versa.
Let's say you have chosen the strategy and timeframe for trading in the market. The next step is to select the main currency for your currency pair. Most traders choose the US dollar (basic) currency pairs. The USD exchange rate for Forex reflects its value in the equivalent of other currencies.
It is important to remember that the value of the USD in the foreign exchange market depends on several main factors: trade and investment balance, interest rates, US stock markets, inflation, politics, speculation, etc.
Advantages of the Forex trading
All financial markets have the so-called BID/ASK spread (the difference between the price you bought and sold goods/currencies at a given time). For example, in the futures market, you can pay also a commission to a broker, a stock exchange, and a fee for clearing services in addition to a spread. Forex is distinguished by a very narrow spread and absence of commissions for transactions.
Trading with a leverage
Forex leverage or financial leverage gives you an ability to manage large market positions using less of your own capital. Simultaneously, it allows you to open positions on a larger number of instruments since it frees up unused capital. Another bonus: Forex market is one of the few round-the-clock financial markets. Trading in Forex, you can use constant liquidity 24 hours a day, 5 days a week.
Large transactions cannot manipulate prices. The international currency market Forex is so huge that its liquidity does not allow any single fund or trader to control the behavior of prices. Banks, hedge funds, government, and private individuals are only participants in the market, which has unprecedented liquidity. This distinguishes it from, for example, the stock market, which is very strongly influenced by large sellers and buyers.
Calculation of income in real time
Forex allows you to calculate your income in real time. You can add potential, but not yet fixed profit to your deposit. With the necessary experience in the market, it allows you to build more effective trading strategies.
An ability to apply experience from the other markets
If you are familiar with the other financial markets or trading strategies, you can easily make a transition to trading in the Forex market. It does not matter at all whether your experience is based on the use of fundamental analysis, or whether you prefer a technical approach. Both of these methods work in the international currency market.