Dmitri Lysenko
Any trader dreams of conquering the Financial Olympus to join the industry’s most prominent personalities like Larry Williams. However, not all of them know that knowledge, skills and ambitions are not enough to stay a winning player for years. It is also vital to have a good time when trading Forex (or other financial markets). If trading is painful and disappointing, there is no point in trying to make money this way.
Well, Forex trading used to be a difficult business a decade or two ago when the industry wasn’t as developed as it is today. At that time, few traders (most of them were institutional traders like banks and financial companies) could actually make money in the long run. Individual trader simply couldn’t afford to trade the genuine interbank market as the initial capital requirements were too high ($250 000 and higher).
Since then a lot has changed. Forex has evolved. As opposed to the 2000s, there are hundreds of thousands of mediocre traders with minor capital who trade Forex and other financial markets. Trading stopped being millionaires’ prerogative. These days, beginners can start from cent accounts, depositing a couple of dollars.
Moreover, broking companies keep improving their products and services in order to stay afloat in today’s highly-competitive Forex industry. They develop innovative solutions. Some of them allow people to trade Forex and make decent profits on a regular basis without direct participation. These opportunities attracted a lot of investors from around the globe.
A Little Bit of History
According to Yuri Borovoy, a representative of ActivTrades’ Russian office, Forex (stands for foreign exchange) emerged as a substitute for the Bretton Woods system, proclaiming a new era in economy and finances – floating exchange rates. This took place in the 1970s. Since then it has been guided by the principle “buy cheap, sell expensive”.
Probably, one of the most prominent pages of the Forex history was the period when George Soros was a Forex participant. In 1992 he made fortune on the decline of the British Pound. Some experts still say that he was responsible for that collapse. As a result, the Bank of England had to withdraw the national currency form the currency exchange mechanism, which affected other European currencies.
Another major even was the introduction of the common European currency in 1999. The ECB was in charge of the eurozone’s monetary policies. At that time, Forex entered a new stage of evolution when multiple broking companies make financial markets available to a wider range of participants, including mediocre traders and investors.
When PAMM was introduced to Forex, this opened a new page in the history of the global currency market. People got an opportunity to profit without any specific knowledge and skills by simply trusting their money with professional managing traders. The investment niche of the industry has been actively developing since then.
As a result, Forex has evolved into the world’s most liquid market. The daily turnover grows every year:
· 1977 - $5bn
· 1978 - $600bn
· 1992 - $1000bn
· 1997 - $1200bn
· 2000 - $1500bn
· 2006 - $4000bn
· 2010 - around$4500bn
· 2011 - over $45000bn
Experts assume that the turnover will be around $10 000bn in 2020. It turns out that Forex is currently the world’s number 1 financial market.
Forex and Euro
Market Leader: Why did the introduction of the Euro currency become a major event for Forex traders?
Yuri Borovoy: The thing is that the new financial instrument contributed to the tightening of spreads for liquid currency pairs. At this point, the spreads are at the lows. For example, out company (ActivTrades) offers some of the industry’s tightest spreads for Euro pairs - from 0.8 pips.
For reference sake, in 2006 the Euro became the world’s 2nd major currency after the US Dollar. It is obvious that being another global reserve currency, the Euro plays one of the key roles in today’s global financial system. According to official stats, in 2008 the Euro accounted for 26,5% of the currency reserves stored by the world’s leading central banks.
Market Leader: Does the overall picture look positive for the common European currency?
Yuri Borovoy: Yes, it does. As for Forex, the Euro is currently the second most traded currency after the US Dollar, ActivTrades’ research confirms. At this point, 40% of daily Forex transactions are Euro-related.
For now, the Euro is the best trading instrument for conservative traders. Thanks to tight spreads and high volatility, EURUSD creates a lot of profitable opportunities for scalpers and those who trade intraday. Another reason why the Euro is attractive is the current interest rate, which means it is beneficial to open long-term trades in the Euro.
High liquidity makes it possible to trade the Euro at high speed and volume. In this aspect, ActivTrades offers some of the industry’s best trading conditions. Apart from MT4 and MT5, traders can trade via mobile devices and get access to the company’s exclusive innovative solutions like Molanis, SmartOrder, SmartTemplate and many others.
Forex: Competitive Edge
Market Leader: What are the differences between Forex and other financial markets?
Yuri Borovoy: The major difference is that Forex is bigger in terms of turnover and market participants (both individual and institutional traders and investors, not to mention an army of broking companies). Forex is the most stable financial market. If there is a bearish trend in a stock market, it usually turns into a crash, which is usually fast and strong. When a currency declines that means that another currency strengthens against it. Therefore, currencies are the most liquid and stable financial instruments in today’s trading industry.
Another benefit is that Forex makes it possible to trade round-the-clock (24/5), unlike stock and commodity markets. It is the most liquid market in the world, which allows traders to make deals at set prices determined by the interbank market.
Forex trading is available to beginners and mediocre traders. To trade Forex, you don’t have to accumulate decent initial capital. Today’s Forex industry is highly competitive, which forces broking companies to constantly improve the quantity and quality of their products and services. Innovation and quality have become the key aspects for those client-oriented companies who want to be among the best of the best. ActivTrades is one of such companies. By the way, ActivTrades PLC is authorised and regulated by the Financial Services Authority (FRN 434413) and is a member of the Financial Services Compensation Scheme.
Still, we should always keep in mind that Forex, Spread Betting and CFDs are products traded on margin and carry a high degree of risk to your capital. They are not suited to all investors and you can lose substantially more than your initial investment. Please ensure that you fully understand the risks involved, and seek independent advice if necessary.
As for the prospects of the Forex market, they are impressive. That is why ActivTrades is determined to stay client-oriented, thereby supporting both beginning and professional traders and simultaneously giving them an opportunity t enjoy the process of trading.
Dmitri Lysenko
