What is Forex ?
“Forex” means Foreign Exchange; it is also known as FX. In a Forex trade, you buy one currency while selling another.
Currencies trade in pairs, like the Euro-US Currency (EUR/USD) or US Dollars / Japanese Yen (USD/JPY).
Forex trading is used to speculate on the relative strength of 1 currency against another.
The foreign exchange market can be an over-the-counter market, meaning it is just a decentralized market without central exchange.
Who trades currencies, and just why?
Daily turnover in the world's currencies originates from two resources:
Overseas trade (5%).
Companies trade products in overseas countries, plus convert earnings from international sales into domestic currency.
Speculation for income (95%)
Most traders focus on the biggest, most liquid currency pairs, known as “The Majors”. Included in these are US Dollars, Japanese Yen, Euro, Uk Pound, Swiss Franc, Canadian Dollars and Australian Currency.
Actually, more than 85% of daily Forex currency trading happens in the major currency pairs.
The world's most traded market; open up 24 hours per day
With average daily turnover of US$3.2 trillion, Forex is the most traded market in the world.
To put it very simply, currency trading is a way to profit from the rise and fall season in the values of different currencies of the world. One currency is continually changing in value compared to another. Which means you can generate profits by exchanging a falling currency for a rising one through liquidity forecasting.
In practice, you will work with a set of currencies, which may be the US currency and the euro, known as the EUR/USD couple. You might watch the way the price of the pair changes relating to which of both currencies is recognized to be conditioning and which one is weakening.
You then buy or sell the couple to benefit from the change after cash visibility.
Anybody can get into Forex trading nowadays. Once, it was true, that it was almost exclusively the province of the international banks and finance institutions, and Forex traders exercised of Wall Street and the other major financial centres of the world.
It has all improved with the growth of the internet. Almost all trading is done online, so that it can be done from everywhere. You don't need to be on a trading floor in a major city. Traders could work from their office buildings or from your home.
Individuals can set up traders too, managing their own accounts through their broker's software program via the internet for bank account management.
One definition of the liquidity of any commodity is that it's a way of measuring how easily it could be changed into cash without impacting the value.
Currencies are already cash so currency is more liquid than any item.
There remain 150 currencies in the world. Most countries, no matter how small it is, have their own currency, although some Europe uses the euro plus some countries use the United States dollar.
However, a few of the minor currencies are pegged against the dollar; so that it cuts down the number you could trade.