It’s unlikely that you haven’t heard about forex trading. Forex trading has been booming exponentially over the past decade or two. Today, you’re likely to find advertisements for forex trading applications, courses, and similar things all over the internet. But that wasn’t always the case. Governments, banks, and financial institutions have been trading foreign currencies for a long time. However, forex trading wasn’t accessible for non-institutional traders for the longest time. But technological advancements and the internet have changed that.
The foreign exchange market is the most valuable and liquid financial market worldwide, dwarfing other financial markets like stocks, commodities, metals, etc. According to BIS, forex markets had a daily turnover of over $6.6 trillion in 2019.
Considering how valuable the forex market is, it’s no surprise that many people gravitate towards forex trading. However, before delving into forex trading, consider learning more about how forex trading works to ensure you don’t incur avoidable losses.
What is Forex Trading?
Forex is a portmanteau of foreign currency and exchange. Forex trading refers to buying, selling, and exchanging one currency for another. People often need foreign currencies for different reasons, including tourism, business, etc. Let’s assume you’re a US citizen vacationing in Greece. You’ll likely need Euros to buy goods and services while touring Greece. Likewise, if you’re dealing with a Chinese corporation, you might need to purchase Chinese Yuan to pay for their goods and services. Hence, exchanging foreign currencies is crucial for most individuals and businesses.
How Does Forex Trading Work?
Forex traders exchange foreign currencies to profit from price fluctuations or interest rate differentials. Typically, forex trading works through currency pairs. Forex traders buy and sell currency pairs to generate returns. So, what are currency pairs?
Currency pairs measure one currency’s value against another. Currencies have exchange rates that determine their terms and position against another currency. For instance, the Euro to US Dollar is currently trading at $1.12. That means if you wanted to purchase the 1 Euro on the forex market, you would need to pay $1.12 for it.
You’ll be interested to know over 170 currencies exist on the forex market. However, statistics show the seven most popular currency pairs account for approximately 68 percent of forex trading volume. Typically, the most popular currency pairs include the US dollar because of its ubiquity and global acceptance; and the Euro because of its collective strength stemming from the EU and EEA.
Forex has some distinct features that make it unique compared to other asset classes like stocks, indices, and commodities. Traders can profit from forex trading in two ways, including through exchange rate changes and interest rate differentials. Traders profiting from exchange rate differentials will purchase a currency with a higher exchange rate and short the currency with a lower exchange rate. A notable example of traders benefitting from exchange rate differentials is when they would short the Japanese Yen for the British Pound Sterling before the 2008 financial crisis. Currency exchange rates primarily vary based on the market forces of supply and demand.
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Forex trading has grown exponentially in the past decade or two. The internet and technological advancements have opened up forex trading access for non-institutional traders. As a result, a new wave of forex traders has emerged.
People have been heavily investing in forex, and for a good reason. Research shows the foreign exchange marketplace is the world’s most valuable and liquid market. According to statistics, forex markets had a daily turnover of over $6.6 trillion in 2019. In addition, the forex market has over 170 different currencies that traders exchange round the clock.
Considering over 170 different currencies exist on the market, you’ll be surprised to learn that seven currency pairs account for approximately 68 percent of forex trading volume. These currencies are the most popular, and traders clamor to add them to their portfolios.
What Are Currency Pairs?
Currency pairs refer to two separate national currencies that traders pair for trading on the foreign exchange market. Both paired currencies will have exchange rates that determine the trading position. Typically, currency pairs measure the value of one currency against another. As a result, you’ll find every currency pair has a bid and ask price. The bid price refers to the maximum price a buyer will pay for a currency, while the asking price is the minimum price a seller would accept.
Forex trading in the marketplace takes place through currency pairs. Hence, they’re extremely crucial. You’ll find that the most common currency pairings often include the Euro or US Dollar. The Euro is particularly popular because it’s a shared currency for the European Union. Meanwhile, the US Dollar reigns supreme because of its global acceptance. Many countries will often use the dollar instead of an official currency because it’s stable.
The Most Popular Foreign Currency Pairs
Here are the most popular foreign currency pairs. They include:
USD/JPY
The US Dollar and Japanese Yen currency pairing are particularly popular. Many traders often refer to it as “The Gopher.” The Gopher currency pairing boasts high liquidity, meaning traders can trade the currency pairing in large quantities without worrying about price fluctuations. In addition, this currency pairing also has one of the tightest spreads in the forex market. As a result, the trading cost for this currency pairing is low.
Euro/USD
The Euro and US Dollar is also popular currency pairing. It’s also referred to as “The Fiber.” Fiber is the world’s most commonly traded currency pairing because of the strength of both individual currencies. In addition, traders prefer Fiber because it has very low spreads and boasts high liquidity. These factors also make it excellent for scalping.
GBP/USD
The British Pound and US Dollar currency pairing are also known as “The Cable.” Most traders view Cable as a volatile currency pairing because of price fluctuations and exchange rate movements. The British Pound has been particularly volatile in recent years, especially since Brexit. However, many day traders hold onto Cable because they can profit from the price fluctuations. Likewise, swing traders also favor Cable for this reason. Most experts recommend technically analyzing the market carefully if you’re trading Cable.
Euro/GBP
Another popular currency pairing is the Euro and the British Pound. This currency pairing is commonly referred to as “The Chunnel.” Most experts consider Chunnel one of the strongest currency pairings because of the solid trade history between the UK and the rest of Europe. However, recent events like Brexit have made Chunnel more volatile, appealing to experienced traders.
USD/CHF
The combination of the US Dollar and the Swiss Franc is another popular currency pairing known as “The Swissie.” The Swiss Franc has always been popular because many investors consider Switzerland a safe haven, contributing to its financial stability. Generally, the Swiss Franc remains stable during periods of high market volatility, making it an excellent investment.
Start Trading Your Favorite Currency Pairs with Trading Mentor
Trading Mentor is one of the best online mentoring platforms around. The website numerous online trading training courses, making it the best trading platform for beginners.
If you’re looking for the perfect trading mentor to help you with your stock, forex, or crypto trades, consider checking out our website today.
Investors can look at various measures to understand the performance of stock while also indicating the overall economy’s performance. If you’re a trader looking to invest in stocks, you’ll want to know how the market performs to make more profitable decisions.
The most common measures to gauge the stock market condition are market indexes. New traders need to learn about these through online stock market investment courses to understand how each index works.
This will help you stay aware of any fluctuating prices to trade profitably. The S&P 500 and the Dow Jones Industrial Average are the most popular indexes that you need to know of. Let’s discuss these in further detail to help you understand better.
The S&P 500 Index
The S&P 500 Index or the Standards and Poor index is a market-cap weighted index. This is calculated for showing the changes in total stock market performance, and the value of the companies is more than changes to prices per share.
The S&P 500 Index includes about 500 of the world’s most widely owned companies in the US. These include Xerox Corporation, McDonalds, Google, Abbott Laboratories, and Procter & Gamble.
Dow Jones Industrial Average
The DJIA is a price-weighted index calculated by adding the prices per share of each company and adjusting the divisor to show changes in shares. This helps figure out the price continuity of a company’s shares over time.
The DJIA is one of the oldest market indexes in the US and has about 30 companies in it. These companies are also commonly referred to as blue chips, which have had consistent growth and seem like attractive investors.
The DJIA is somewhat similar to DJUA and DJTA, which were also developed by Charles Dow, a co-founder of the Wall Street Journal. These indexes were used to provide market insight to the readers. One of the companies that have been in the DJIA since 1896 is General Electric. This index still presents a clear image of the business climate and trend recognition for the US stock market.
If you’re new to stock trading, you’ll need to understand what these major indexes show and how you can capitalize on them. This will significantly reduce risks and help you make more informed trade decisions. Taking stock trading courses for beginners is your best option, as these will help you identify opportunities and gain more from stock trades.
NASDAQ Index
The NASDAQ Index measures the value changes in company shares listed under the NASDAQ Stock Exchange. This evaluates the total market value change of the listed companies on the exchange, especially the changes that affect the technology industry.
If you’re looking to make successful trade decisions in the stock market, our online mentoring platform can help you out. Trading Mentor’s online trading training courses are taught by some of the best trading mentors from across the globe. You can choose a mentor based on their rating, locality, price, and experience. What’s more, we also offer traders an opportunity to join our team and mentor other traders looking to start their trading careers. Contact us today to learn to trade stocks and more!
Trading in the forex market is very challenging, especially for new people. If you don’t have the right guidance, tools, and understanding of the market you may not make as much profit for the time investment.
This is why you need help from some of the best forex trading mentors from Trading Mentor. forex trading can be an amazing career option got people who can make successful profits. It also provides for a passive way to earn income from home.
Let’s discuss some important reasons why you need an expert’s help before you start trading.
New Possibilities
The best mentor for stock trading or forex trading will help you find opportunities that you need for trading with the best traders. Mentors have years of experience in the trading industry and can take full advantage of the market.
The online trading training courses at Trading Mentor will also help you understand weekly market shifts and trends. This will allow you to look for the best trading opportunities to capitalize on.
You can also become a part of a larger trading community where you can find people who’ll share engaging ideas about the market. All this information will prove profitable for your trading journey.
Putting Everything Together
The biggest challenge for a forex trader, in particular, is that you’ll have to think about trading strategies, money management, account management, and several other things. This can make trading appear overwhelming. However, there’s a faster route to successful forex trading—hiring the best forex mentors. A mentor will help you develop a strategic plan that can help you in various ways.
You can track trading progress, determine goals, make adjustments, and more along the way. Mentors also know how the intricate trading systems work and which brokers are the best for your trading conditions.
What’s more, mentors will help you become an effective trader by helping you understand the ins and outs of trading. However, you need to look for a reliable mentor that can help you become an independent and confident trader. Luckily, at Trading Mentor, we have several experienced people ready to teach you.
Shorter Learning Curve
Having someone save your money by helping you define goals and correcting your trading mistakes can be priceless especially if you are new to trading. To learn how to become a successful trader in the market, you need dedication, time, effort, and high-quality education.
Most people don’t get the time to study forex trading or develop techniques of their own. A mentor can significantly reduce the time you need to understand the trading of different currencies. They will also help you realize the mistakes you are making and how they are affecting your trading success.
To trade like the best, you need to learn to trade with the best. Learning anything from an experienced individual such as a trading mentor will give you the head start you need to start a trading career.
The stock market may feel complicated and vague to operate in. This is especially true when you consider how stock trading for beginners may not work out in their favor. This is why it’s recommended that you study a few online trading training courses before stepping into the market.
Trading mentors can help you identify the best trade opportunities, which can significantly increase your profitability as a trader and reduce losses. But before you learn to trade stocks, it’s important to know where it all started to realize the market’s significance and growth.
Let’s discuss everything important about the stock market, its origin, and memorable historical events that made it the market we know today.
The Idea of The Stock Market
The stock exchange was developed to be a digital or physical space where traders invest in shares or stocks of publicly traded companies. The pieces of every share are driven by supply and demand. This means that the more people buy these shares, the higher the price for those shares.
On the contrary, the less a share is sold, its price will also be less. Today, stock markets are in the majority of the countries across the globe, but the market first emerged in Amsterdam during the 17th century.
Major Historical Events in Brief
Belgium, which used to be called Antwerp became the center of international trade back in the late 1400s. Merchants would come here to buy the goods anticipating a price spike to earn profits. Later in 1611, the very first modern stock trading system was developed in Amsterdam.
The very first publicly-traded company stock was from the Dutch East India Company. It stayed public for several years as the only company with exchange and trading activities. Afterward, in 1700 a group of merchants signed a Buttonwood Tree Agreement where the men would buy and sell bonds and stocks daily, which came from the NYSE. At the beginning of 1790, Philadelphia Stock Exchange was formed, which helped the development of the USA’s financial industries and its expansion in the west.
Trading goods can date back to ancient civilizations. In the earliest times, businesses combined finances to take a ship across the sea and reach other continents or countries. Individuals or trading groups usually executed the transactions.
During the Middle Ages, the merchants would assemble in town to exchange goods from across the globe. What’s more, as the merchants were from various countries, establishing a money exchange became necessary.
Belgium or Antwerp at the time became the international trading center, and merchants would buy goods at certain prices, expecting them to rise. Anyone who required funds would borrow them from wealthy merchants at high rates. The merchants would also sell bonds that were backed by interest rates.
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The World’s First Stock Market
What started in Antwerp was soon innovated and improved in Amsterdam in 1611 when the Dutch East India Company began to trade their stocks publicly. The company did this for raising capital and decided to pay dividends on their stocks to every investor. For several years, this was the only company publicly traded on Amsterdam’s stock exchange.
Other companies also took a similar approach, and investors started to buy even more stocks. However, some investors were blinded by the idea of dividends and didn’t research the company they were investing in. As a result, in 1720, the investors started to sell all their shares impulsively. As no one was buying any stocks or shares, the market crashed.
Another worth mentioning scandal involves England after the South Sea Bubble. Even when the market crashed and the investors were concerned, the idea of trading stocks was already established for the future.
The US Stock Market
While the first stock market was started in Amsterdam, the US incorporated the idea of stock markets in the late 1700s. This happened when the group of merchants developed the Buttonwood Tree Agreement. Under this agreement, the merchants would meet every day to sell and purchase stocks which ultimately became the origin of the NYSE.
The Buttonwood merchants were considered the creators of the biggest stock exchange in America, the Philadelphia Stock Exchange. This was the US’s first-ever stock exchange that was founded in 1790 and had a major impact on the development of financial institutions throughout the US.
Trading began in 1971 on another stock exchange in America called Nasdaq. Later in 1992, Nasdaq was merged with the International Stock Exchange which was based in London. This merger also became the world’s first intercontinental securities market.
While the NYSE was a physical stock exchange, Nasdaq had the option to sell and purchase stocks through a network of computers. What’s more, the NYSE and Nasdaq were also able to buy and sell stocks on the American Stock Exchange or stock exchanges present in other regions. These regions include San Francisco, Boston, and Philadelphia.
Further Developments in The US Stock Market
The Buttonwood merchants visited the merchants in Philadelphia to mimic a similar exchange model. This created the New York Stock and Exchange Board in 1817.
All the members had a defined dress code and had to earn their seats in the exchange. They also had to pay a fee of $25, which was raised to $100 in 1837. Following the events of the Great Fire in 1835, which wiped out about 700 buildings in the Lower Manhattan area, Wall Street incurred significant property losses.
However, Samuel Morse initiated a telegraph which allowed traders to remotely communicate with each other. Later in 1903, the NYSE opened its doors to several hundreds of stocks that were kept safe in underground vaults.
Ever since then, the NYSE has experienced various crashes, including the subprime mortgage crash of 2008. However, it’s important to realize that the foundation of the NYSE was established just by some trade merchants centuries ago. All the regulators, traders, and companies have heavily contributed to making them famous globally.
Global Transactions
The NYSE is the largest stock market right now. The stock trades range from international to domestic levels. These also include exchanges with the Tokyo stock exchange and the London stock exchange. Some other prominent stock exchange markets are situated in South Korea, France, Germany, Canada, India, and China.
Stock Market Indexes
When studying the stock market, you may have heard about indexes named S&P 500 and Dow Jones Industrial Average. The two indexes are the most popular benchmarks that determine the performance of the whole economy or the market.
To best understand how these indexes can work to your benefit, especially as a beginner trader, you may want to study these. Trading Mentor’s stock trading courses for beginners will help you understand these indexes.
The platform’s best stock and forex trading mentors will guide you through every step of the trading process, minimizing trade risks and increasing your understanding of the financial markets. This will help you gain experience and make profitable decisions independently.
Charles Dow and Edward Jones came up with the Dow Jones Industrial Average back in 1896. This index included oil, tobacco, sugar, railroad operators, and gas companies. The stocks with a higher price per share influenced the index more than lower-priced stocks. The index was designed to serve as a representation of the economy.
Nowadays, several other industries are also included in this index, including consumer companies, financial companies, technology, healthcare, and more. General Electric was one of the original members of Dow. Proctor & Gamble was added to the index in 1932,which is in the benchmark to date.
On the other hand, the S&P 500 was developed by Henry Barnum Poor’s company in 1923. The index began tracking about 90 stocks back in 1926. However, the S&P was found as a result of the company’s merger Standard Statistics.
The S&P 500 is more of a weighted-cap weighted index. This means that if the company’s market value is greater, its influence is greater. The market cap and market value will be calculated by multiplying the price per share by the total outstanding shares. Both the S&P 500 and Russell 2000 have become major indicators for traders to invest in stocks even more than the Dow Jones Industrial Average.
Stock Market Cycles
Stock markets can fluctuate on any given day, and the US market has gone through major shifts in its history. The market has gone through significant movements that expanded and affected the market over days or even years.
If you want to learn more about how stock market cycles work, professional online stock market investment courses can help you out. Online platforms like Trading Mentor will help you learn the ins and outs of online trading for beginners so that you can thrive in the financial market and enjoy greater returns.
If investing in stocks doesn’t interest you, the platform also provides professional forex mentors online that will help you create strong trading foundations. You’ll be able to learn how trading for beginners works with highly experienced and skilled mentors.
The first phase occurs when the market prices are low and traders start purchasing the stocks in greater quantities. The second phase is the mark-up where buyers will further increase the prices of the stocks as more and more buyers start purchasing them.
The distribution phase creates a mixed sentiment among the buyers and in the mark-down phase, the pieces will fall.
Over the centuries until the modern-day, markets that exist continuously evolve, and exchanges never stop. Nowadays, traders and retail investors can purchase stocks and shares for companies that can be traded publicly through a stockbroker. The shares can also hold bundles of diverse stocks rather than shares of a single company.
Starting your stock trading journey may seem challenging, but anyone can make profitable decisions with the proper knowledge and guidance. Trading Mentor is an online mentoring platform that offers forex and stock market investment courses to help you gear up and enter the overwhelming trading market.
Forex trading is exchanging fiat currencies based on the prevailing exchange rates. The process of exchanging currencies has been with us for centuries and dates back to the Babylonian era. Nowadays, forex trading is one of the most significant financial markets globally. It’s mostly liquid and accessible to everyone.
This is why traders must realize the history of forex and the historical events that have shaped the market we know today. You can even learn a bit about forex history through our online mentoring platform’s online courses.
Let’s briefly discuss the history of forex trading to help you understand better.
Where It All Began
Forex originated from the barter system, which was the main method of trade back in 6000 BC. The tribes introduced this system in Mesopotamia. Under this system, goods used to be exchanged for other goods.
In the early 6th century BC, gold coins were introduced. These coins were the first currency with divisibility, portability, uniformity, durability, and accessibility. Gold coins were widely adopted as a medium of exchange.
In the early 1800s, the gold standard was adopted where the government was able to redeem paper money in its gold value. This only worked until World War 1. Later in the early 1900s, the gold standard supported the foreign exchange market. The countries started to trade with each other to convert the currency into gold.
Key Events in Forex History
In the 1990s, the currency markets were becoming more complicated and faster than before as the money value changed. With the internet, a person sitting home can find an accurate price for their currency. This previously required several brokers and traders.
Because of the internet, advancements in communication were a great way for countries to globalize and capitalize on their currency markets. New and emerging markets flourished by currency speculations and attracting foreign capital.
The history of forex since 1944 is a classic example of how a free-market works. The competing forces had given birth to a marketplace where liquidity was unparalleled. The spreads also fell dramatically, which further increased the competition. People trading larger amounts could now access the same communication networks that global merchants and banks used.
Forex Now and In the Future
Nowadays, the forex market is one of the largest markets in the world. In 2019, there was more than $6.6 trillion worth of trades on the forex market daily. However, the future of forex is uncertain as several factors keep changing, creating various opportunities for the traders.
Forex traders need to stay ahead of this fluctuating curve to succeed in the ever-changing market. This is why taking online trading training courses is essential for understanding the ins and outs of the market.
