Forex, also known as foreign exchange trading or currency trading, is the conversion of one currency into another. Consider yourself one of the most traded markets in the world, with an average dollar trading volume of $5000 billion worldwide, and an average dollar trading volume being $5000 billion. Including event trading, including forex trading, including forex course trading.
What is forex trading?
Forex or foreign exchange can be defined as a network of buyers and sellers who transfer currencies among themselves at an agreed rate. It is the means by which individuals, companies, and central banks convert from one currency to another - if you have traveled abroad, you have probably traded forex.
While many foreign currencies are converted for commercial purposes, the vast majority of currency conversions are made for profit. The number of currencies converted per day can cause significant fluctuations in the price movement of some currencies. This volatility is what makes the forex market attractive to traders: it offers great opportunities for big profits, and it also involves increased risks.
How do currency markets work?
Unlike stocks or commodities, foreign exchange is not traded on an exchange, but is traded directly between two parties in an over-the-counter (OTC) market. The forex market is managed by a global network of banks spread over four major forex trading centers in different time zones: London, New York, Sydney and Tokyo. Since there is no central location, it is possible to trade forex 24 hours a day.
There are three different types of forex markets:
Spot forex market: is the physical exchange of a currency pair, which takes place at a specific point of settlement of the transaction - that is, immediately - or within a short period of time
Forex futures market: where a contract is agreed to buy or sell a certain amount of currency at a specified price, to be settled on a specified future date or on a set of future dates
Forex futures market: A contract is agreed to buy or sell a specified amount of a certain currency at a specified price and on a specified date in the future. Unlike futures contracts, futures contracts are legally binding
Most traders who speculate on exchange rates do not plan to receive the currency itself, but rather make predictions about exchange rates to take advantage of price movements in the market.
What is the base currency?
The base currency is the first currency in the currency pair, while the second currency is called the quote currency. Forex trading always involves selling one currency in order to buy another, which is why it is included in pairs - the price of a currency pair is the value of one unit of the base currency in the currency.
Each currency in the pair is listed as a three-letter code, with the first two letters usually representing the region and the third for the currency itself. For example, GBP/USD is a currency pair that involves buying the British pound and selling the US dollar.