What is forex?

WHAT IS FOREX FOREIGN EXCHANGE MARKET
HOW TO MAKE PROFIT AT FOREX

 
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Company World Forex Corp will help you to become the participant of the foreign exchange market and to succeed in trading at Forex market.

 




 
WHAT IS FOREX

Forex – is an international foreign exchange market (shorten form from "Foreign Exchange"). The history of this market started in 1971 when the transfer from the fixed rates of the national currencies to the market, floating rates was implemented. The Forex market operates every day, 24 hours a day (except weekends and some holidays). The deals on currency exchange (conversional deals) are concluded at Forex remotely by millions of participants who physically are in other countries of the world. This is one of the main differences of the Forex market from other markets which have a distinct place for concluding deals.


THE MAIN PARTICIPANTS OF FOREX MARKET INCLUDE:

CENTRAL AND COMMERCIAL BANKS
The main turnover of all foreign exchange transactions at Forex market falls to the share of commercial banks to the accounts of those the other participants of the market carry out foreign exchange and deposit-credit transactions. The functions of central banks are the state currency reserves control, currency circulation consolidation, rate stability of national currency to the foreign currencies security and guarantee. Therefore, central banks may influence a currency exchange rate both directly (exchange market interventions) and indirectly (interest rates control).

INVESTMENT FUNDS AND COMPANIES
Investment funds (polled investment institutions) provide attracting of the investors’ financial resources in order to make profit from investing them into securities, profit participation rights and real estate.

CURRENCY EXCHANGE, BROKER AND DEALING COMPANIES
Currency exchange is the element of the foreign exchange market. The main task of it is to provide service in the conduct of exchange trading sessions in the process of which the participants enter into transactions with foreign currency.

Dealing and broker companies fulfill intermediate functions in the provision of financial service during speculative transactions of buying and selling currencies in order to make profit from difference in rates.

INDIVIDUAL PERSONS
 Individual investors, as a rule, operate with minor amounts through stock intermediaries (dealing centers), which provide necessary technical facilities for the real-time access to the market currency rates, the possibility for trade executions and settlements with crediting (so called “leverage”). The leverage is provided to a client automatically at the moment of opening a deal and is 30 – 5000 times more than the margin level. This scheme of crediting allows a market participant, who has just a minor amount available for trading, to make a considerable profit during the transaction due to increasing the volume of the transaction. Because of different factors the currency rates are in a constant movement, changing every minute. That allows a large number of transactions during the day.

The interest to this market is rising year to year due to its possibilities for remote Internet trading.
 
HOW IS THE PROFIT AT FOREX MADE?
Let us take a more detailed look at profit generation with the specific example of making a transaction. Goods which are sold and bought at Forex – are specific currencies. The rate of one currency is always quoted in terms of the specified quantity of the other currency. For instance, quote (cross-rate) EUR/USD displays the price of 1 EUR, quoted in USA dollars (USD). This quote always has two different values: the buy rate (Buy, Bid) at which this currency is bought and the sell rate (Sell, Ask) at which this currency is sold. Of course, the buy rate is always lower (i.e. everyone at the market wants to buy low) than the sell rate (i.e. everyone wants to sell high). You will also want to enter the market with the same goal! To buy low and to sell high!

Let us take a chart history of USD/JPY quotation fluctuation. At point “A” the rate was 111.01, after a period of time – 109.71 (point “B”). The difference between quotations at section A-B equals 130 points (111.01 minus 109.71). In general, it is just a minor difference if to be calculated in relative terms (about 1%). But for the trader operating at Forex, even such a minor rate fluctuation can bring a considerable profit. If a trader forecasts at point “A” that the rate will “decrease”, he/ she will effect a sale (operation SELL), and after some time, at point “B”, he/ she will close the position (closing transaction) by reverse operation effecting a purchase (operation BUY). The reported profit: 130 points. Also, on real accounts the spread (the difference in prices between the Bid and the Ask quote) that can average from 1 to 10 points on different currency pairs should be taken into consideration. In this example, the spread volume is not taken into consideration for more convenient calculations What is the profit made from this transaction in money terms? Let us assume that a trader used 100$ for the transaction. At the moment of BUY operation the dealing center provided him/ her with the automatic credit (leverage) 1: 100, i.e. he/ she could sell currency (at point A) not for 100$ but for 10000$! At the rate of 111.01 yens for 1 dollar this equals 1110100 yens. And at point B he/ she buys dollars for this amount at the rate 109.71, having earned 10118.49 $. At the moment of closing position the credit is automatically closed (the sales proceeds are divided by 100 according to the leverage) and a trader makes the reported profit of 101$ from the transaction. Compared with the start amount used for the transaction (100$), his/ her profit equals 100% from the amount, he/ she has doubled it!

So, we can see that even at the rate fluctuation of 1%, traders manage to make a considerable profit. Sometimes the rate fluctuations can be 200-300 and more points a day.





HOW CAN I LEARN TRADING AT FOREX?
To learn how to trade at Forex and to practice in transactions, it is necessary to download the trading terminal, and to install it to your computer. Prior to doing this read User manual. Then register in the Trader Room and open a free of charge demo account for trading. These and other options are available in the Trader Room. During the registration you can select any amount of a start deposit with which you will start working. Money on demo-accounts is virtual, but the basic trading conditions for trading on demo-accounts fully comply with real conditions: you will receive market quotations, see currency rate charts in the real time mode, and make transactions.

To get more detailed information concerning trading rules and means of transactions visit the page How to trade? where you will find the detailed descriptions of the trading process and the examples of transactions.