What is a Forex trader? Beginners' Guide

What is a Forex trader? The definitive guide to forex trading

June 4, 2021
1 month ago

What is a forex trader? The definitive guide to forex trading

If you've ever wondered what a forex trader does and what kind of work it entails, this post is for you. The forex market is the act of exchanging one currency for another during trading hours. It is the most liquid market in the world, which means that the amount of forex traded is the largest of any market. It is also one of the only markets that never closes.

What is the forex market?

The forex market has its own peculiarities, but it is not so different from other markets, such as futures or equities. It is where the currencies of multiple countries are traded, and its operations consist of buying when the currency has a value over one currency (the dollar, for example) and selling when it changes.

The exchange rate is measured in PIPs, and here you can find an article we have written to help you understand what those are all about: ¿What is PIP in Trading?

How does the forex market work?

Simply put, the forex market is a form of arbitrage and uses complex algorithms to determine the best market price for the forex pair (one currency over the value of another) based on market conditions.

An arbitrage opportunity occurs when a forex pair trades at a lower market price than it is supposed to, providing an opportunity to profit.

The best known forex market in the world is the so-called London forex market (LIBOR). You cannot trade directly on the market, but trade on exchanges, much like how eBay works, when a forex broker helps you find the best opportunities.

What does a Forex Trader do?

The forex market can be divided into two main activities: trading and trade management. The first is the act of buying and selling forex at regular market prices during the hours when others are doing the same - and the aim is to compete for a higher profit.

The second is that, instead of trading, you manage a forex portfolio. It is an ongoing process involving trading psychology, setting your risk levels, hedging and market timing.

If you are planning to start a career in the forex market, you will need a solid background in finance, strong emotional control and trading management, because it is a very specialised field. Here you can find our basic course to get you started in trading: Curso Bolsa y Trading para Torpeso

We hope we have helped you once again. May the market be with you!

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