Every day more people are interested in making investments online. And this, not only because of the ease offered by the new platforms to do so, but also because of the profitability it generates for users.
In addition to trading, which consists of trading or speculating in financial markets, there is a new trend that is moving and is the Forex.
Forex is the acronym for Foreign Exchange, which is also known as the currency market. To be a little clearer, this activity involves buying and selling coins worldwide.
According to Marcelo Granada, Forex analyst, this market is decentralized, which means that the operations do not happen in a single part, but on the contrary in the whole world at the same time thousands of transactions are being made.
“For example, a central bank can do business with another central bank. Meanwhile the Bank of the Republic makes a negotiation with Bancolombia, and on the other hand, I am buying dollars in a house of exchange. This means that everywhere business happens at all times, “explains Granada.
Another characteristic of this market is that it is fluctuating and its prices vary from point to point. An example of this is the Market Representative Rates (TRM) since these change according to the country in which it is being negotiated.
Finally, it is also highlighted that Forex is a 24-hour market, that is, all the currencies of the world are fluctuating all this time.
HOW IS FOREX MADE?
As well as trading, the Forex is carried out through a platform that allows investors to know what the interbank prices of the different global markets or the Central Banks are.
Why, that whoever makes this type of transaction has access to the best market prices and take advantage of fluctuations. “Let’s say that the dollar will be higher, for example, because the interest rates in the United Kingdom after ten years rose again. In this panorama we analyze that news, and what we could do is to invest downwards in sterling or to buy dollars with sterling, which is the same, and we earn everything that the currency goes down, “explains Granada.
To make this movement it is necessary to take into account three key concepts. The first is that of parities: this is the confrontation between currencies, one that is the base and another that is in which it is negotiated.
This indicates the relationship that exists between the two currencies, that is, what must be delivered from one to receive a unit of the other currency.
The next concept is the broker: this is a financial entity or institution that organizes transactions between a buyer and a seller; It is also essential to perform the movements since it is the entity that will open the doors to the foreign exchange market.
In these, anyone with 100 dollars or more can enter their money and this, in the case of the Forex, will give an operating platform where you can see the graphs, read news and the processes of your transaction.
“The broker what he does is give one the technology so that one makes trading and this one earns a small commission known as a spread,” says Granada.
And here we come to the third concept that must be taken into account when entering the world of Forex. The spread is the difference between the purchase value and the sale value of a currency. This amount is what is given to the broker for each transaction that is made.
Marcelo Granada also mentions that Forex transactions can be very short-term (minutes and hours) or long-term (days, weeks or months). Additional notes that the time a person must invest to track their investments is inversely proportional to the delay of transactions.
“That depends a lot if the person wants to make short-term, five-minute or one-hour transactions. For these cases, a lot of time must be devoted, because one must be attentive to the screen to know, for example, when to leave, “explains Granada.
Contrary to this, if the movements have a delay of one week, you can spend an hour a day. “Even so, you always have to spend time. It’s a job and you can not invest and leave things without a follow-up, “says Granada.