What is the forex market and how does it work?

For many people, the

foreign exchange market

it is the natural space in which they move when operating. Today we want to tell you what the foreign exchange market is, how it works and what are the best tips to make a profit and do good Forex trading.

What is the foreign exchange market

There are currently more than 170 currencies in the world, and many of them operate in their own market that never closes. When you travel to a foreign country your money may not be worth the same as on a subsequent trip. The


allow us to obtain economic benefit when we operate with currencies. These currency differences is what allows the foreign exchange market to show itself as one of the most active in the world.

Every day it moves approximately a whopping figure of between 6 and 7 billion dollars.

How does the currency market work

The factors that motivate the fluctuation of a currency are quite diverse. In the first place, the strength of the economy of this country, followed by the different socioeconomic scenarios that take place. If you want a current example in this 2022, you only have to look at the depreciation that the ruble, the Russian currency, has suffered.

With a drop of more than 30%, it is the perfect example that currencies can become a great opportunity when it comes to having good dividends. In general, these changing situations are used to operate in the foreign exchange market.

Currently, of the total number of currencies in the world, 13 of them are called

convertible currencies

that is, those that can be freely exchanged for others.

The currently convertible currencies are these:

  • Danish crown
  • The Norwegian crown
  • swedish krona
  • Australian dollar
  • Canadian dollar
  • American dollar
  • New Zealand Dollar
  • Euro
  • Swiss franc
  • Pound sterling
  • Russian ruble
  • japanese yen
  • Chinese yuan

Non-convertible currencies are those that are used exclusively within the territory of the country that issues them, and correspond to economies that are not as strong.

Therefore, the Forex market operates exclusively with convertible currencies.

Very common practice is to operate with the fluctuation suffered by the dollar with respect to the euro. If the dollar is at a low level with respect to the single European currency, it is time to buy so that later, when its value increases, you can obtain the desired benefit.

Tools to control trading

When you are clear that you want to operate in the foreign exchange market, you must have at your disposal a series of tools that will help you do it well. Remember that any lack of discipline or operations carried out randomly are the perfect broth for disaster.

You will know that trading has a high graphic component, that is, observing the evolution of currency pairs is a good mechanism to try to predict its evolution. Within trading, the simple moving average or SMA and the

exponential moving average

or EMA.

The simple moving average is an indicator that shows us the evolution of a specific value. This value is obtained by calculating the total sum of the price that a currency has been providing divided by the number of days that we are analyzing. Indeed, it is a classic average AND it is an element that helps to quickly identify a trend.

However, the exponential moving average has an addition. In this case, it is an exponential average which age greater importance to the most recent data. As you go back in the graph, the values ​​will have less importance with respect to the last ones.

How to get the most out of support and resistance

These terms are commonly used in trading, and identifying them will help you understand how a security works.

We speak of support when the price no longer falls regularly and begins to rise, and we speak of resistance when it no longer rises and begins to fall. So that you can understand it in a simple way, they correspond to both the floor and the ceiling of a specific value. As a trader, you have to be able to identify both support and resistance to try to take advantage of those situations and be able to analyze the future trend.

For you to be able to trade successfully, a good analysis of support and resistance can be the key to achieving what you can take advantage of. Establishing support and resistance charts is a good starting point to begin to identify these spaces and be able to act accordingly.

Therefore, our recommendation always goes through a training period if you are still not able to identify both support and resistance.

You have a lot of contrasted information with which you can begin to train. To tell the truth, a section on support and resistance would be enough for several blog posts, but at least knowing how to identify these terms is a good start. You can watch the evolution of currency pairs on your computer screen, and draw horizontal lines with both support and resistance to see within what range they move.

This will give you an idea of ​​what the usual price range is, and allow you to take the risk that is fair and necessary to be able to profit from your trades.

The forex market is always very attractive, so if you want to start your trading operations within it, you have the advantage of being able to trade 24 hours a day every day of the year.

If you are thinking of investing, we recommend joining NAGAwhich offers an account DEMO with $10,000 so you can do the tests you need, before using real money.

In addition, you can earn money by helping others earn money, sharing your trades, or copying the trades of more experienced traders. Discover the benefits of social trading.

Trade channel.

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