Basics

What is forex and How does it Work?


Forex is the short way of saying “Foreign Exchange”. This means the global market for exchanging 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).

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 a 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).

Largest international market Globally

The forex market is decentralized across the globe. It consists of dealers 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 dealers 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 dealers 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 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 solution 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 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

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

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 and you can monitor the AI trading performance directly on our dashboard.

2. Manually with AI forex signals.

Wiseinvest also provides AI forex signals that perfectly fit into MT4, MT5 and any trading platform. To trade with our AI forex signals, you must simply copy the data you receive from each real-time signal into any forex brokerage account of your choice.

There are five unique variables for each AI signal, and each must be copied exactly, in order to match the performance of the signal as close as possible.

Each AI forex signal alert consists of the following five data points:

  • Symbol (forex pair)
  • Direction (long or short)
  • Position size (number of units or lots)
  • Take profit (price level to exit with maximum gain)
  • Stop loss (price level to exit with maximum loss)

You can trade forex with our free forex signals clicking here, or with our Premium subscription that provides you unlimited AI signals and automated AI trading in partner brokers. Whether you are a beginner or a Professional forex trader, our AI trading system can help you save time and improve your trading performance. Get started with free AI.

  1. Subscribe to a Wise-Plan.
  2. Open a Brokerage account. Check this article about the best forex Brokers.
  3. Set an amount and a position size on your Wiseinvest dashboard.
  4. Copy the signals that we will send to you via email and paste you’re your Brokerage account.

The forex signals are sent every time that our trading system powered by Artificial Intelligence (AI forex system) identifies a new trading opportunity.

When investing through Wiseinvest automated AI trading or AI forex signals, you do not need to calculate pips or change the leverage in your forex broker account. Learn more about leverage in forex trading clicking here.

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 AIsignals.

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.

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.

The forex broker Fxcm warns that 69.66% 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.