Basics

What is forex and How does it Work?


Forex is the short way of saying “Foreign Exchange“. This means the global market for trading international currencies, also known as the FX market. When someone prices or exchanges a currency against another, the exchange rate is best on the particular forex trading pair (i.e., both currencies involved in the pair). 💷 💶 💴 💵

🎯 Our mission is to help you invest efficiently in forex and improve your results. Get extra valuable forex trading ideas from leading finance experts on the trading Academy and our free forex Telegram channel.

💹 When trading forex, we suggest you consider long term results.

What you can learn ahead 🎓
  • Understanding forex trading
  • Essential terms used in the forex trading field
  • How to trade forex efficiently with AI trading
  • What are the best forex brokers to trade?

Understanding forex trading🔬

Currency pairs are typically priced out to four decimal places, depending on the currency denomination, where one ten-thousandth of a unit of currency is known as a pip (i.e., 0.0001 unit), which is the smallest price increment (in addition to fractional-pips).

The EUR/USD, which is the most widely-traded forex pair, is an example of the Euro (EUR 💶) currency against the US dollars (USD 💵) currency.

📌 When trading one unit of EUR/USD, you can calculate the price in USD (i.e., a price of EUR/USD 1.3000 indicates $1.30 per euro). Conversely, when exchanging the USD/EUR, each unit of USD (i.e. each dollar) will have the price of a specific number of euros (i.e., a USD/EUR price of 0.7700 indicates €0.77 per dollar).

A speculator expecting the price of the EUR/USD to go up will buy the EUR/USD pair long (buying a pair to open trade can be a bullish or long position). Whereas, a speculator anticipating a drop in the price of the EUR/USD may sell the pair. (bearish or short position: selling to open a trade).

Why you should consider investing in forex

An important point to be resolved when planning to become a trader is to decide where to invest. There are several financial instruments to consider, such as Stocks, Forex, Bonds, Treasury bills, Savings account, real state, and so on.

Forex is the short way of saying “Foreign Exchange“. This means the global market for trading international currencies, also known as the FX market through a forex broker. These are the key features of forex:

  • Forex sessions are 24/5 from Sunday at 5:00 pm Eastern (ET) through Friday 5:00 pm.
  • With an average daily volume of $6 trillion, forex is the largest and most liquid financial market in the world.
  • Due to the large volume of forex offers great opportunities to invest.
  • Due to a wide variety of existing Forex brokers, Forex has become increasingly affordable.
  • You can start trading forex from just $1 or with a risk-free practice account with a lot of forex brokers.
  • It’s possible to invest automatically in forex with AI trading.

In the next paragraphs, we will detail more about these features of the forex.

Largest international market Globally 🌎

The forex market is decentralized across the globe. It consists of brokers such as central banks, private and public banks, non-bank intermediaries, brokerages, and large corporations such as insurance giants and other participants engaged in international finance.

The Foreign Exchange market is the largest globally, with nearly $6 trillion in average daily volume traded as of April 2019, according to the latest BIS Triennial Survey of Central Banks.

The FX market suffers the influence mainly by each government’s monetary policy, the supply, and demand of the global economy. As well as international trade agreements, and users and suppliers of currencies (hedgers), in addition to speculators.

forex trading worth it

Market integrity and progress

While there have been cases of forex market manipulation by the biggest banks and brokers in the past, the amount of influence any one entity can have on the prices of major currencies is negligible. This resistance to serious manipulation risk is due to the enormous amount of trading and resulting liquidity available.

The FX Market itself has high price integrity. Because it is an electronic market, efficient and with a certain size. Participants must still adhere to best practices.

Efforts such as the Global FX code were launched to encourage forex brokers to uphold the best-execution where the basic price available is given to traders.

These efforts are why the spreads and trading commissions continued to improve over the years, as the FX market evolved. In addition, regulators have competed to increase local market integrity and efficiency by creating more strict regulations. These come from the top-tier financial centers such as the US, UK, Singapore, Japan, Australia, among other advanced economies.

Investing and trading in the forex market 💹

As an asset class, Forex is well-established and offered by many regulated brokerages from within a margin account.

The use of leverage is what makes forex trading more risky than non-margin investing.

Margin-based trading is used by investors as well as self-directed traders and fund managers, thanks to the range of risk-management tools available within forex trading platforms (mobile, web, and desktop software). Wiseinvest provides automated AI trading solutions and AI signals with 40 investment strategies and risk management.

Forex market research and analysis

There are two primary ways for traders to assess and identify trading opportunities in the forex market.

  • One is through the use of fundamental analysis, which looks at economic news and data released by governmental agencies, as well as market sentiment data.
  • The second is through technical analysis, which pertains to the historical and current market price of the underlying currency.

The most traded Forex pairs

Do you know which are the most traded forex pairs? Here is a review of a survey conducted by the BIS bank.

  • The US Dollar (USD 🇺🇸) is the most popular forex trading pair, with 88.3% of global trades involving the ever-reliable greenback.
  • The second most popular currency in the forex market is the Euro (EUR 🇪🇺), accounting for 32.3% of trades.
  • The Japanese Yen (JPY 🇯🇵) comes in at third place, with 16.8% of all trades involving this currency. However, the Japanese Yen’s share has dropped 5% in the last three years.
  • Currencies that belong to emerging market economies contribute to 24.5% of all forex trades. This constitutes a rise of 4% when compared to the last BIS Bank survey, which was conducted in 2016.
  • The British Pound Sterling (GBP 🇬🇧) accounted for 12.8% of all trades in 2019.
  • The Australian Dollar’s (AUD 🇦🇺) share in global forex trading remained at a stable 6.8%.
  • The Canadian Dollar (CAD 🇨🇦) and Swiss Franc (CHF 🇨🇭) each accounted for roughly 5% of forex trading in 2019.
  • Trading in Chinese Renminbi has seen an increase that was in line with aggregate market growth. The Renminbi is at one side of 4.3% of all forex trades.
  • The Hong Kong dollar has seen a surprising increase in the overall share of the forex market in the last three years. The HKD’s share has doubled from 1.7% in 2016 to 3.5% in 2019.
  • The New Zealand Dollar (NZD 🇳🇿) has retained an unchanged percentage of the market – with 2.1% of all transactions involving this currency both in 2016 and 2019.

Would you like to learn more about the best forex pairs to trade? Click here to learn more.

The best way to trade forex

There are two ways to invest with our AI in forex:

1. Automated with AI-Trading. Check out the 3 steps to trade automated with our AI.

automated trading with ai bot

By trading forex automated with AI, you will save time and improve your performance without monitoring the market and managing trading platforms.

With Automated AI trading you do not need MT4 / MT5 and other trading platforms to invest in forex. All forex trades are automatically placed into your broker account every time that our AI system identifies a new worthy trading opportunity. You can monitor the AI trading performance in real-time directly on our dashboard.

Automated AI trading benefits ✅

  • Setup in 3 minutes.
  • Totally hands-off, from anywhere.
  • Invest from just $1.
  • APY of 40% over the past 13 years*.
  • Lightning-fast execution & no slippage.
  • No commissions, no management fees.
  • Portfolio with 40 different automatic strategies.
  • No MT4/MT5 or other platforms required.
  • Test with a risk-free practice account.
  • Trading results directly on our dashboard.

Don’t you have a broker account yet? Our AI is integrated to trade automated with the brokers FXCM and Oanda. Click here to open an account with FXCM or here to open with Oanda.

Advanced forex trading strategies and algorithms 

The foundation of successful trading in the forex market is having a trading strategy. It’s based on a specific methodology that best suits your trading needs. Strategies could be manual, automated, or a combination of both.

Over the past decade, there has been a proliferation of automated trading strategies made available for retail traders.

And while there are many serious traders with established track records for their trading systems, there are many more low-quality trading systems falsely marketed as high-quality by overly eager affiliates, making it harder for investors to navigate the market for trading signals.

There has also been an increase in the social copy trade. Where an operator can mimic other operators’ businesses in real time.

Whether using a copy-trading platform or an automated trading system, in almost all cases, this type of investing is considered self-directed and doesn’t require a power-of-attorney or another third-party money manager to handle your account.

Unlike other copy and social trading platforms, Wiseinvet’s AI has the ability to execute a huge set of market data. It does by combining technical and fundamental analysis. This strategy can increase the accuracy of our automated AI-Trading and AI-signals.

Self-directed forex investors

Compared to investing in a managed fund, there is greater responsibility. Traders put it on self-directed traders who use trading systems. A self-directed trader should conduct more detailed due diligence. It can avoid falling for the countless low-quality trading systems that exist on the internet.

  • Good quality trading systems will have established track records (historical results), and there will be other quantitative performance rankings, along with qualitative data about the strategy developers and any proprietary math used to operate the strategy.
  • Bad quality trading systems will usually promise high returns will not equally emphasizing potential risk.

There are no guarantees that a strategy will perform well. But conducting proper due diligence can help traders assess various trading systems. They consider using them to aid their trading or investment strategy.

What is the AI performance in forex trading?

The Win Rate of our AI varies according to the period and can reach up to 95%. The performance is based on the efficient frontier measurement metric, which means that our model is profitable whenever the Win Rate is greater than 60%. All strategies of our AI trading system seek stable returns and sufficient results to achieve an average return of 40% per year (APY), without the use of high leverages.

We understand that what matters in forex trading is the final result. Thus, the investor needs to consider that Win Rate is not always the best metric to measure performance in forex, as other signal providers disclose. For instance, out of 100 trades, only 1 trade may be enough loss to make the 99 trades not profitable. In this case, the Win Rate would be 99%, but the final result would be unfeasible (negative).

We focus on the return of 40% of APY and not just on Win Rate.

It is essential to observe that forex brokers may charge spreads, commissions, and overnight fees in your trading account, and these factors can affect the AI performance. You can check our forex trading track record to understand more about AI trading performance clicking here.

How much do I need to trade forex with AI?

You can start in forex trading with free AI signals or AI trading account and deposit just $1 in the broker. It is also possible to test using a risk-free practice account with our AI trading system. However, to do efficient risk management in real accounts, we suggest you start from at least $100. Notice that some forex brokers require different initial deposits to trade forex.

What is the trading strategy of our AI?

Our AI strategy is the combination of different AI trading systems, with more than 100 features, that define 40 different strategies which simultaneously consider: Quotes of the 28 forex pairs, Supports & Resistances in different time frames, Trends and Counter-trends, Cross-indicators, Index of each pair, Economic Calendar, Investors Sentiment.

Our AI analyzes those fundamental, technical, and sentiment factors that affect forex trading, and all criteria are evaluated in real-time using different weights. After completing the analysis, the choice of the signal emission strategy is made considering the increased likelihood of short-term profit and the amount available for investment.

Using technical analysis, our algorithm considers not only the patterns of various trends, including support and resistance levels and cross-indicators, but our AI is also able to create its own real-time index for each currency pair, that is used to identify what is the best direction and target.

In relation to fundamental analysis in forex, the AI makes a correlation within the economic calendar to find news data that can affect specific currency pairs.

What is the best forex broker for my country?

We have listed here some of the top forex brokers to trade, such as FXCM and Oanda. However, as long as not all forex brokers accept accounts from all countries, you need to check availability to open a Forex trading account directly with the broker. We have been working to identify the best foreign exchange brokers for each country, as you can see below:

Did not find a licensed forex broker in your country to trade forex? Remember that forex trading is not regulated in all jurisdictions, but most countries allow their citizens to open an fx trading account with foreign brokers. For example, this is the case for forex in Nigeria 🇳🇬 and Brasil 🇧🇷.

How long should I hold my investments?

The great famous investor Warren Buffett says if you don’t feel comfortable owning a stock for 10 years, you shouldn’t own it for 10 minutes. Even during the period he called the “Financial Pearl Harbor,” Buffett loyally held on to the bulk of his portfolio. This reinforces the importance of being patient when using our AI trading solution. 😉

Takeaways 🎓

  • With an average daily volume of $6 trillion, forex is the largest and most liquid financial market in the world and offers great opportunities to invest.
  • Forex session are 24/5 from Sunday at 5:00 pm Eastern (ET) through Friday 5:00 pm ⏰.
  • Due to a wide variety of existing Forex brokers, Forex trading has become increasingly affordable.
  • Wiseinvest provides the best AI trading solutions for forex. You can trade automated from just $1 through partner brokers with AI trading or manually with AI forex signals in the forex broker of your choice.
  • You can invest in forex with automated AI trading or AI forex signals for free.
🎯 Wiseinvest is committed to democratizing the retail forex trading market through AI solutions. We work hard to provide financial education, allow anyone in the world to invest easily with Automated AI trading and free AI forex signals. To assure the quality of the AI trading system, our multi-layer platform is integrated with AWS, IBM Watson, and Google AI.

Enjoy other free articles about forex trading on the trading Academy and on our free forex Telegram channel.

Disclaimer: Forex and Contracts for Difference (CFDs) are complex instruments and come with a high risk of losing money due to leverage. Forex trading is not suitable for everyone. You should consider whether you understand how forex and CFDs work and whether you can afford to take the high risk of losing your money.

The forex brokerages displayed shall disclaim the overall performance of traders in their platforms. Oanda warns that 76.8% of retail forex traders lose money trading CFDs. XTB warns that 80% of retail forex traders lose money trading CFDs.

FXCM warns that 74.74% of retail forex traders lose money trading CFDs. The performances aforementioned are not related to Wiseinvest AI forex trading and AI forex signals system. You can check the performance of our AI forex system on our dashboard.