Forex Trading

The stable currency that is paired with all the other currencies is the USD. The currencies are divided into base and quote currencies while trading. The base currency is the first currency that is shown in a currency pair, and the second currency that is used to value the base currency is called the quote currency. These two currency types are necessary in order to perform forex trading. 

The forex market doesn’t close itself to boundaries, so it can be traded from anywhere in the world. The forex market is managed by trading terminals and computer networks. The traders in the forex market are institutions, investment banks, commercial banks, and retail investors from around the world.

Forex trading has been garnering attention from the crowd as it has become a space for budding entrepreneurs and industrialists. Trading also has a lot of opportunity when done right, and Seven Capitals is trying to capture the attention of interested investors who are trying to earn potential profits and returns from the forex market. 

Types of Markets

Forex is traded through spots, futures, and forwards. The spot market is the first and foremost of the three markets. When people talk about the forex market, they are most likely referring to spot markets. Spot Markets are where the currency is traded at trading price The trading price variations depend on supply and demand. The supply and demand of currencies will depend on factors such as current interest rates, economic performance, price speculation, geopolitical sentiment, etc. 

Forwards and futures markets are the ones that come right after spot prices. A forward contract is a private agreement between parties who agree to buy currencies at a future date at a predetermined price. The conditions of the contract are discussed and set by the parties.

Futures contracts are agreements between two parties, and they follow the same principle as forward contracts at a future date at a predetermined price. The contract will have specific details, including the number of units being traded, delivery and settlement dates, and minimum price increments that cannot be customised. 

The factors that affect forex trading prices are: 

1. Interest Rates: when the respective country governments induce a spike in the interest rates, it is shown that there is a profitable association between increased interest rates and the currency. Such currencies are traded most in the forex market. But when the interest rate falls, the currency becomes less popular among traders.
2. World events: Global economic and political events have a valid effect on the prices of the currencies and how they perform in the market. The connection between the countries is the main reason why such events impact the forex market and the currencies. If the news is positive for a certain country, then it will have great positive effects, and vice versa in case of negative news.
3. Inflation rates: Countries with lower inflation rates are more likely to have stable currencies with low-interest rates. The country will also have good growth and development in cases of low inflation. Higher inflation rates can have a negative effect on the development of currency and therefore become not a good opportunity for investment.
4. Economic Stability: when the country possesses currency economic stability than that country’s currency is something that can denote positive growth and worth investing in. Whereas an economy with weaker ground cannot be trusted and investing in it can be high risk.
5. Government Debts: Government debts are a normal scenario that is practised by countries' governments when there is a need for excessive funds for running the country. When there are high debt rates, it naturally amplifies the inflation rate, which turns down the value of the currency. When the government has a lower debt rate, it will actually help the economy for better growth and hence the currency becomes a better choice to invest in.
6. Central Banks: A central bank of a country is the policy making body that scrutinises the different tax policies that are required for the country’s growth and development. Such policies will keep inflation rates at bay, resulting in a better value for the currency. It makes it a feasible investment.