Confusion is education’s obvious counterpart. Especially when talking about a very complex sphere—such as Forex, where many questions seem to arise from the general public. So let’s start with the most pressing one.
What is Forex?
Forex is a portmanteau of foreign currency and exchange. Foreign exchange is the process of changing one currency into another. The Foreign Exchange market is decentralised by nature. It lives completely online and uses a great variety of different countries, currencies, and commodities.
The Forex sphere—who is it composed of?
The main actors of the Forex industry are far and foremost the broker itself, who provide the trading services, and its clients, who use them and are regular people. Also, Forex services rely on the essential relationship with liquidity providers. They function as mediators who are highly required to give traders access to the Forex market, offering the most accurate value estimation for the traded currencies.
There are global and local Forex brokers—the bigger the reach and regulatory scope, the bigger the Forex broker.
What is it with the license issue?
Global Forex brokers operate in a multitude of countries. They are often allowed to operate globally through multiple international documents. As international business companies, they are usually equipped with the required set of incorporation documents, allowing to offer global financial services to clients worldwide.
An essential advantage of working as a globally recognised Forex broker is the trading conditions they wish to offer and secure for their clients. Global Forex brokers have a wider variety of instruments on offer with fair and competitive trading and investing conditions that otherwise would simply lack on the Foreign Exchange market. Therefore, opportunities arise that wouldn’t be attainable under other circumstances.
As discussed above, decentralisation for the Forex market is vital. It operates—without exception—online and utilises a wide variety of different regions and even continents, national currencies, and commodities. Even local brokers must use some features and advantages of international partners, such as payment systems and other services. So, it sounds like it can’t be limited to one particular country entirely.
Differences between Forex and binary options
The confusion between two particular financial spheres still appears to be running rampant: Binary options and Foreign Exchange. One cannot mention enough that clarification on this matter is in high demand. Let’s take a look at some essential differences between the two.
Binary options as financial products have an expiry date (those ‘fixed time frames’ mentioned above)—Forex does not. But in both instances, you speculate on whether a given asset will go down or up.
Forex grants its traders the application of individual profit targets with the Stop Loss orders mentioned above. Both are unavailable for binary options. In the latter, the trader needs to win the majority of trading bets to have a successful, profitable long-term track record.
There is much confusing information messing up the understanding of what forex and binary options are. So, it is crucial to understand the difference and distinct forex brokers (such as OctaFX, FBS, InstaForex) and binary options companies.
They are NOT the same.
So, Forex is not gambling?
No. Gambling is when one is always uncertain of their chances of winning. Also, unless gamblers use foul play, they always believe the odds are stacked against them. Their chances of winning are consistently lower than those of the institution they gamble with. One can’t analyse or forecast the next combination of a slot machine or Blackjack card playing position.
However, Forex traders, especially the conscious ones, should come up with various trading strategies that will shift the odds in their favour. They can use different analysis tools to detect market trends and turn them in their favour, opening a position that is bound to be profitable for them.
Thus, being fully prepared for market behaviour, taking risk management seriously and accumulating relevant knowledge, they can be sure to develop a profitable overall position after some skilful trading patterns.
Let’s sum it up
Once again, Foreign Exchange is decentralised but at the same time a globally regulated and deeply established financial market. Moreover, binary options are not Forex, and Forex is not binary options, let alone any kind of gambling as some on the internet are attempting to claim. There is a craft to learn and regular profit to be made, even recurring income. But as with any legitimate endeavours to thrive on the financial market, one has to be ready to train their skills through education and learning.
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