Forex or foreign exchange is a market where the world trades in currency. After the dethroning of the Bretton Woods System, gold was no more the base of the transaction, it was commodities. Post 1973 the world has engaged in trading one currency for others in order to earn a profit. The foreign exchange market amounts to 1/3rd of the total trading industry. As of 2018. the forex market reached a cap of 1.5 trillion US dollars in a day while its competitor, the traditional stock market was at 200 million US dollars a day.
Unlike the stock market, forex is not regulated by any central authority which allows the buyers and sells to get in touch with each other independently. Generally, a broker works as a middle man in these transactions and all trade operations are conducted online by registering yourself with a reputed broker. It is by far one of the largest markets in the world with all kinds of players involved like international financial institutions, government central banks, multinational corporations, offshore funds, small businesses and individual investors. To understand and speculate the trends in the forex market, one needs to well informed about the policies regarding geopolitics, economic welfare and monetary growth.
To be able to speculate the future trends, you must have a comprehensive trading strategy that you stick to. The market is prone to heavy fluctuations and violent shocks created by government policies and the market forces of demand and supply. To keep your currency afloat you need to devise a plan and for that, you need to understand the market. You need to understand government policies and how they affect the trend in this market. The government will always try to keep its currency strong so it will interfere with the market by selling off the currency or buying currency to maintain equilibrium and save the economy from drowning.
Perform in-depth fundamental and technical analysis to on multiple factors which might affect the market now or in the near future. You must learn how to read economic reports, the effect of inflation, low supply, gross domestic product (GDP) and other policies on the foreign exchange market. Do not remain confined to the data of one’s own country but also study the economic policies of other countries as foreign exchange is performed with two international currencies and changes in one affect the other. It would become easier to spot future trends if you pay careful attention to business news, regular changes in world trade and global economics can have drastic effects on the forex market. For example, if one country places trade bans on another country or if a trade route is disturbed due to a dispute, the global trading economy has to suffer its effects.