Winds of war are blowing on the financial markets and, in a period of geopolitical instability like this, forex trading is also suffering the repercussions. The domino effect of every important event is an inevitable consequence, which affects the most strategic sectors of the world economy.
From the moment the United States announced that Ukraine could be invaded by Russia, the markets have started to move accordingly.
The rush to purchase safe-haven assets was, as analysed in other similar historical periods, the first clear effect. The main references remain gold and hard currencies such as the dollar, the Swiss franc and the Japanese yen.
The experts of the Commerzbank, one of the largest banks in Germany, have recently underlined how strong the energy dependence of the Eurozone is on the Russian area. A fact that suggests a difficult life for the euro in the event of an escalation of the conflict, but which would also lead to a significant surge in energy costs.
The markets, at the moment, are in a state of waiting with respect to the situation and will remain there until the dispute takes a well-defined path. As many reports suggest, what history teaches remains to be taken seriously. During the previous conflicts, from the Second World War to the war in Libya, the Stock Exchange has always shown important thrusts.
What is forex trading
Forex trading is the financial investment activity that allows you to speculate on the currency market. The profit is generated by the trading of foreign currencies, thanks to the ability to exploit the price trend.
The term forex is the abbreviation of Foreign Exchange market, whose literal translation is currency exchange market. It is an interesting market for those who love the sector and want to start a financial investment business, even a secondary one. The advantage of online trading is that you can operate in a world market while staying on your sofa at home. Open 24 hours, 5 days a week, it allows for great freedom of management.
On the other hand, forex trading allows you to start by investing minimum amounts for each operation, even if in any case it is essential to update yourself through the official sector channels, relying on the safest platforms.
There are training courses, run by the brokers themselves, which allow you to acquire the basic skills to be able to face these negotiations with greater awareness and more freedom of movement.
How forex trading works
It is not difficult to understand how to trade forex based on the buying and selling of currencies at the same time. In practice, the trader buys one currency and sells another at the same time.
The exchange, however, always takes place strictly in pairs. For example, the pound with the dollar, the euro with the yen and so on.
Specifically, the first currency on the left is called the base currency, while the second currency on the right is called the quote currency.
This currency negotiation can be carried out through special online platforms, called, precisely, brokers. The purpose of this market is to facilitate international trade and investment, relying on eight currencies representing the major economies. The reference areas are: United States, European Union, Switzerland, Japan, United Kingdom, Canada, Australia and New Zealand.
What are the risks?
The Forex market is highly volatile, and prices can move quickly and unpredictably due to world events. This can lead to losses if you are not prepared for sudden shifts in the market and negative equity.
But while your money is safer in banks (and lets face it savings interest rates are great at the moment), you are capped on potential earnings. And while the potential risks are there, so are the rewards.
There are also various types of fraud in the Forex market so it is important to be aware of potential scams and to only trade with reputable brokers.
How to choose a broker
If you do not have the necessary skills to choose a broker, it is good to first clarify your ideas by doing in-depth reading on the subject. Also following other expert traders allows you to begin to understand the mechanics of the sector.
The turnover is exorbitant, consequently so are the opportunities. Almost all currencies are traded for speculative purposes only, reaching 90/95%, for a total value of more than 5 trillion dollars a day.
Whichever broker you choose must possess the basic requirements of reliability and seriousness, the main one being regulation by control and supervisory bodies, such as CySEC for example.
The interface must be intuitive and clear, designed for end users. No less important is the availability of webinars, informative material, slides and information that fully support those who choose it for their online trading activity. Last but not least, a good broker must also offer the trading account in the demo version.