What is Forex?
FOREX consists of the first syllables of the words “Foreign Exchange”. In the simplest definition, Forex is the general name of the market where the currency of one country is exchanged with the currency of another country. In Turkey, it is also known as “Foreks” (Leveraged Buy-Sell Transactions).
Although this definition is very suitable for the period when the foundations of the markets were laid, today many commodities such as stocks, CFDs, international indices, gold, silver, oil, cotton, especially parities, are traded in the Forex market.
Forex, which is the fastest developing and most liquid market in the world, started with foreign exchange transactions between banks in the 1970s, and with the introduction of various institutions into the system over time and the widespread development of internet technologies, both investment instruments diversified and took shape in the world markets in terms of being shaped according to the demands of investors. has been an important building block.
The Forex market, which is accepted as an international over-the-counter derivatives market, is constantly developing by maintaining its dynamic structure, unlike other financial markets, since it is not connected to a single center.
Why should I prefer forex transactions to invest?
The Forex market can meet all these needs today, when it is necessary to react quickly and instantly and to develop global strategies in order to benefit from the investment and return opportunities offered by the developing technologies of the economy and finance world.
Forex, which can be traded 24 hours a day, 5 days a week, when the world markets are open, is one of the favorite financial markets for investors due to its easy access to the market, the opportunity to open positions up to 10 times the deposited collateral, and to be closed to manipulation.
In addition, low transaction costs in the forex market, high order diversity that enables investments to be directed instantly, and managing all these from a single platform are among the factors that make the market attractive.
There are always buyers and sellers in the forex market, which eliminates the difficulties of making physical investments, thanks to investors living in different geographies and time zones. In this way, both global and local investments can be made in the forex market, where different investment instruments can be invested.
Which financial products can be invested in Forex?
In the Forex market, in addition to many of the world’s most popular commodities such as gold, wheat, platinum, cotton, oil, stocks and stock market indices of the world’s leading companies such as American Airlines, Apple, Coca-Cola, Google and Microsoft, including CFDs Hundreds of financial instruments with risk and return levels can be invested.
At the same time, in forex, which is the largest foreign exchange market in the world, popular currency pairs such as the American dollar, Euro, Swiss Franc-Pound can be traded as well as exotic currencies including major and minor parities.
What are the advantages of investing in Forex?
The forex market, where investors can trade at any time, 5 days a week and 24 hours a day, allows the investor to instantly react to the opportunities and risks in the global markets without being stuck between certain trading hours. In the forex market, where it can be accessed and traded on the internet even from the farthest corner of the world; Investors can evaluate investment opportunities at home, at work, on vacation and even on the go.
Unlike other markets, thanks to the two-way transaction feature in the forex market, which provides an investment return when prices are both falling and rising, investors can direct their investments without waiting for the price to rise, as in the market where one-way transactions are made. This is due to the forex market’s ability to correctly predict the direction of the market and open a transaction in this direction, not the fall or rise in prices.
History of Forex
The foundation of the markets known today as Forex was laid in 1973. However, the conversion of money from one currency to another dates back to ancient times. Before the Second World War, the most dominant currency in the world was the British Pound. However, during the Second World War, the Pound lost its power as a result of the British struggle with Germany. The American dollar, which lost its power with the 1929 crisis, has been the most used currency until today with the strengthening of the American economy during the Second World War, and the United States has become the economic power of the world.
Advantages of the Forex market
• The world’s most liquid market,
• 5 days / 24 hours open market,
• Bidirectional operation possibility,
• Easy access to the market,
• Opportunity to trade with high leverage up to 10 times the collateral,
• Inability to manipulate prices,
• Low transaction costs,
• Variety of trading platforms, including mobile
• Opportunity to trade at the same price with the whole world at the same time,
• Order variety
In addition, the leverage feature, which allows large-volume transactions with small amounts, allows to benefit more from investment opportunities. With a leverage of 1/10 in the Forex market, an investment of $1,000 can be made with an investment of $100.
How to trade with leverage in Forex?
In forex, which is the most liquid market in the world, you can evaluate your investments efficiently thanks to the leverage system that allows you to make high-volume investments with your small savings.
Let’s give a small example to provide a better understanding of the leverage system;
An example of a transaction without the use of leverage;
Assuming the investor’s initial capital is $1000 and calculating the price of brent oil at $50, then 1000/50 = 20 barrels of brent oil can be purchased. Assuming that the price of brent oil rises to $55 after a while, if the investor sells 20 barrels of brent oil at $55, he will get 20*55=1.100 dollars. The investor, who has $1,000 at the beginning of his investment, can earn $100 in return on investment as a result of this trade.
Leveraged transaction example;
Let’s not forget that in Brent oil, 1 lot is equal to 1,000 units and 1 unit is equal to 1 barrel. I bought a barrel of Brent oil for $72.
Let’s pretend. When trading 1 lot in Brent oil in the Forex market, a position of 1,000 barrels can be taken. The size of the 1 lot position taken is 72 dollars * 1,000 barrels = 72,000 dollars. Therefore, when using 10 to 1 leverage in the position taken, it is sufficient that the required collateral is 72.000/10 = 7.200 dollars. In other words, 72,000 dollars of Brent oil transactions can be realized with a guarantee of 7,200 dollars.
Thanks to the leverage system offered by the Forex market, it can perform a trade of 72 thousand dollars at a barrel price of 72 dollars by using 1000 dollars and 1 to 10 leverage. When the price of Brent oil rises to 77 dollars, in this position (77-72) * 1,000 = 5,000 dollars return on investment can be obtained.
It should not be forgotten that; The leverage system includes a high risk of loss as well as a high profit opportunity.
How to invest in Forex?
In order to invest in the forex market, which provides significant advantages to its investors with its market structure and transaction features, an investment account must be created at an intermediary institution licensed by the Capital Markets Board (CMB). Having knowledge about the forex market, by making use of the trainings and seminars given by the selected brokerage house, is of great importance for the correct management of investments. Therefore, investors who want to invest in the forex market should practice the functioning of the market, the market behavior of investment instruments, and their strategies. Thanks to the trial accounts offered free of charge by brokerage houses, you can gain experience without risk by trading with virtual money in real market conditions.
With the regulation brought by the CMB, each investor is required to make a certain number of transactions from the trial account.
Who are Forex traders?
Besides the individual investors who make up the Forex market; central banks, banks, funds, portfolio management firms, companies. On the basis of the participation of so many participants in the forex market; market dynamics, transaction flexibility and freedom.
What is the trading volume in Forex?
In the forex market, which has a daily transaction volume of 6 trillion dollars, 78% of the transactions are carried out in dollars. Since forex, which enables trading in Asian, European and American markets, is the most active market in the world, 80% of open positions remain open for less than 1 week and 40% for less than 2 days. In this way, the forex market, which offers significant investment opportunities in the short and long term, is preferred by more and more investors every day because it provides full integration with the world financial markets and is closed to manipulation.
Is Forex reliable?
One of the main questions in the minds of investors who want to invest in the Forex market is how reliable the brokerage houses are. Unlike forex brokerage houses operating internationally, brokerage houses operating in the USA serve their investors under license from the Capital Markets Board (CMB). GCM Investment Securities Inc. It is among the first institutions to receive a license.
Thus, the CMB, which brought a series of security and market standardizations such as capital, technological infrastructure, transaction rules, limiting leverage ratios to a maximum of 10:1, storing collateral in Takasbank on a customer basis, together with the licensing requirement for institutions that will mediate forex transactions in the USA, protects the investor with regulations.
What should I pay attention to in the brokerage house I choose when investing in Forex?
Before investing in the Forex market, it should be checked whether the selected brokerage firm has a license issued by the CMB. It is necessary to pay attention to whether the brokerage house provides training in order to use the advantages offered to the investor of the forex market, where the logic of “knowledge is power”, and to have information about investment strategies. In addition, the brokerage house offers a free trial account service that will prepare the investor to the market in real conditions, and whether or not to be reached in case of any problems.
