from the English term Foreign exchange market (“Foreign Exchange Market”) One of the most popular abbreviations came from the financial market: forex. We can say that it contains the essence of commerce; Because instead of trading stocks, commodities or raw materials, what is being traded are the prices of currency pairs.
Partly due to its decentralized nature, this market is the most liquid (i.e. the market that generates the largest volume of operations) in the world. It is no wonder, then, that there are so many options for forex brokers where, on secure and easily accessible platforms, traders can make trades 24 hours a day, five days a week.
What forex is not
Although the translation of Forex (or simply FX) is forex market, this term may give a false impression of its dynamics. Because, during the typical exchange process, one currency is exchanged for another, what is negotiated in forex is the value of one currency in exchange for another.
In clearer terms, we can say the following: A trader who works in forex is making a “bet” as to how high or low a particular currency will be in value compared to another. It is from such (potential) valuations and devaluations that your profit comes, not from the prices of the coins themselves.
Who invests in forex
Note that although this text is intended for a specific type of operation in the financial market, we do not use the words at any time investor And investment. Instead, the words were used merchant And trade. For anyone interested in working in the foreign exchange market, understanding the difference between one thing and another is essential.
An investor (even if he has a profile that is considered audacious) adopts medium/long term strategies most of the time. When he buys stocks (which are considered risky assets), he does so with the mentality of someone who has become a partner in that company. It is unlikely that a partner will enter or leave a company overnight.
On the other hand, a trader has a sole and exclusive goal of profiting from price changes. Its goal is to “buy low and sell high”, which requires constant attention to every event that may affect the pricing of a particular currency and feelings To know when (and to what extent) the market will respond to such events.
Is forex right for you?
As you can see, the trader takes a completely different position than the investor. The former can go weeks without looking at a particular quote price, while the latter need to be constantly updated and aware of the slightest price change. And in the case of a dynamic market like the forex market, the level of interest required is even greater.
We conclude by emphasizing that “discipline” is not always enough to become a good trader. It is also necessary to know how to distinguish relevant indicators in macroeconomic terms in order to arrive, from there, with estimates based on increasing grounds. All this requires familiarity with numbers and, above all, interest in everything related to the financial market.