Paypal is an online payment solution well known by South Africa and that allows you to make all kinds of purchases on the Internet. However, recently, this solution also allows you to deposit or withdraw your funds on a Forex trading platform , as brokers in the foreign exchange market are increasingly offering it.
The importance of deposit and withdrawals in Forex
When choosing your future Forex broker, it is necessary to examine different points and characteristics that will determine the way in which we will live our experience of online speculation. However, among the most important points, the simplicity and security of the transactions carried out, that is, deposits and withdrawals of money, are the most important.
Stockbrokers propose different payment methods that allow you to make deposits and withdrawals. Among them we find bank cards, checks or bank transfers, as well as some technological solutions such as Moneybookers or Paypal.
Can you trade Forex using Paypal?
As we have just seen, from now on it is possible, on some speculation platforms, to invest your money using the Paypal system, although not all stockbrokers still propose this technology.
The advantages of this system are numerous. On the one hand, because the transactions are sometimes faster than through other solutions, in particular with regard to withdrawals, and on the other hand, because you only have to register once in this software, since afterwards the user can be identified if you wish.
Some drawbacks of the Paypal system
Although Paypal represents an effective solution to invest your money in Forex, you must nevertheless take into account the rules of each stockbroker that determine the cost of their transactions, sometimes slightly more expensive than with another system, and also the amounts minimums or maximums of your transactions.
Forex brokers who propose the Paypal system
Since the arrival of the Paypal payment system to Forex is rather recent, only some stockbrokers currently propose it. However, it should develop quickly and allow other platforms to include it among their payment methods as well.
Currently, the brokers that accept Paypal are the following:
- Plus500, which offers low margins and efficient analysis tools.
- eToro, known for its social speculation system.
- AvaTrade, which proposes platforms that offer different investment methods, such as CFDs or cryptocurrencies.
76.4% of retail investor accounts lose money when trading CFDs with this provider. You need to consider whether you understand how CFDs work and whether you can afford to take a high risk of losing your money.
What is the Forex?
Learn to speculate in the stock market thanks to our articles dedicated to Forex and investing in major currencies.
Definition of Forex:
The Forex is also called “exchange market”. Its name comes from the contraction of the English terms “Foreign Exchange”, literally “currency market”. Forex is, as its name suggests, the international market in which the currencies of different countries or regions of the world are exchanged.
For example, it is possible to exchange euros against dollars and even against yen or any other more or less exotic currency. But the Forex is also an investment market that allows traders to speculate on the exchange rates of one currency in relation to another. Traders who invest in the Forex market are called “exchange brokers.”
How Forex works is quite easy to understand. Its role is to determine the exchange rate of one currency with respect to another, that is, the value of a currency in foreign currencies. For this, currencies are not traded individually but in pairs, also called “currency cross”.
These pairs are expressed by abbreviations or acronyms, each of which represents a given currency. For example, the cross EUR / USD represents the currency pair Euro / Dollar and therefore expresses the exchange rate of the Euro translated into Dollars. So, if the EUR / USD cross is trading at 1.25, this means that one euro is equal to $ 1.25. Keep in mind that the first currency in the pair is called the “base currency” and the second currency is called the “quote currency”.
The unit used to express this quote is called “pip”.
Quotation of currency pairs on the Forex:
We are going to go into more detail about the way in which currency exchange rates are calculated. But before this, it is necessary to remember what actions investors can take in the Forex.
When trading Forex, you can sell one currency against another. But since the Forex works by currency pairs, the possible actions are the following:
- Buying a currency pair is equivalent to exchanging quoted currencies against base currencies.
- Selling a currency pair corresponds to the opposite movement, since here it is a question of exchanging base currencies against quoted currencies.
The calculation of the exchange rate of currency pairs takes into account the volume of exchange of one currency in relation to another using the system of supply and demand.
Other specific characteristics of Forex:
The exchange market or Forex differs from other financial markets by several characteristics:
- First, it is an international market that groups together all the currencies that circulate in the world.
- The Forex is also a market that is traded continuously for five days a week. Which means that exchange rates continue to evolve overnight.
- Finally, the Forex is the largest financial market in the world in the sense that it generates the largest daily exchange volumes. For this reason, it is considered to be very liquid and very volatile.