“I don’t know what Forex is, and since I don’t understand what it is, I’m sure I haven’t participated in that yet.” – this is something that you might have heard from yourself, or from someone you’ve known. When something appears or sounds strange, it is quite natural for people to frown upon it, or avoid talking about it.
But the truth is, if you have already visited other countries, then you already took part in it. Forex is obviously just a shorter term for “Foreign Exchange.” Even though it sounds really simple, the logistics behind it are actually broader and much more interesting, especially if you’re the type of individual who wants to make the most out of your earnings while just staying at home.
To make it easy for a layman to understand the complexity that Forex might spell, it can just be perceived as a major business institution where money from various places around the world is traded from one form into another. We might say that whenever money transcends across other national borders, it needs to be converted into something else so it can be useful.
It is dubbed as “The world’s biggest financial market,” which makes it clear that it really does contribute a lot to the overall flow of the world’s economy. Within its virtual halls, great amounts of money are transacted, traded, and dealt with by a lot of huge business entities as well as average persons. And we’re not only talking about millions of dollars here, but trillions of Dollars, Euros, and almost any other global currencies you can think of.
The exchange of currencies that take place within Forex is very crucial for the international business world. Forex enthusiasts and participants range from government institutions to private corporations, to plain individuals like you and me. Governments are known to utilize the power of Forex for the furthering of their country’s interests.
For instance, when a particular country wants to conduct some business deals with other countries such as in lending money, borrowing funds, or even in giving aid whenever crises arise, a country needs to convert its existing currency into foreign currency.
With business entities, they leverage the Forex market to facilitate business deals within the international trade. While they do so, they might need to convert the value of goods and services in exchange payments from customers into the currencies they prefer.
Individual investors, or those that we call ordinary traders also use Forex as they monitor the rise and flow of global currencies. In just a span of a week, or even in just a few days, currency prices may hit really high or hit really low, mainly because the market doesn’t sleep.
Though it is just open from Monday to Friday, it functions round-the-clock during those days, conducting a day’s business starting at 4:00 pm central time and ends at the same time the day after. Forex operates this way because it encompasses the demands and activities of the global economy.
The Risks And Dangers In Doing Your First Trading Acts
The concept of losing money as a trader can be simply understood by looking at an event that often takes place within the currency world. Sometimes a currency starts to depreciate. Like for instance, the price of the US Dollar compared to an Asia currency like the Philippine peso could drop relative to each other. Sometimes, it is priced at 50 Php while sometimes it could be 48, or even lower.
The same goes with other currencies out there. As an aspiring trader, you really need to watch out for such trends. Don’t worry too much though, there is an easy way to get get the hang of this problem. There are actually mental conditioning drills that you can implement on yourself so that such an exhausting chore will be a bit easier for beginners like you.
So if you’re a Filipino and you’re seeing that the value of Pesos is at an all-time low for a set of weeks, it would be easy to say that it’s a bad time to go to the US. Because your money, which is of course so much lower compared to the currency of that country, will be pushed even lower once you do some exchanging there.
But when you see that the value of the Peso compared to the Dollar is priced at around 50 or a bit higher, then we can say that it would be a good time to visit your American friends. Don’t expect the Peso to be even close to 60 though, such an event couldn’t happen for now, at least, not yet anyway.
But when trading with currencies such as the Japanese Yen, or the Euro, that is where you can get the best profits possible.
Aside from talking about highs and lows and rising and falling, let’s talk about liquids. Like water? Like oil? Like alcohol? Something like that, but a different kind of liquid. Known for their characteristic of being “incompressible,” they are highly of use to the processes that govern this dear world of ours. So how are they related to the Forex market?
In a lot of ways, they are highly relevant. Because when we study liquids, we can figure out the volatility of the events around us… including what goes on within the money-making and money-trading field. We see oceans rise and fall as tides get controlled by the moon. And if we acknowledge it, changes in the water will rise all boats or sink all of them.
Another relevance about liquid as a term in the Forex market is the “liquidity” that you can execute as you go around buying and selling currencies. Whenever you are interested to buy a particular currency, you can execute that plan at will. All it takes is just a few seconds, or even just a single second, provided of course that the internet connection to which your phone or computer is attached, is quite stable and reliable.
And you're starting to be interested in that thing already 😅