What is forex?

The word “forex” is short for “foreignexchange” and refers to the $4-trillion-daily market of currency exchange, which is the largest financial marketplace on the planet. In other words, forex trading refers to the practice of trading different foreign currencies against one another. Anyone can do it, whether you’re working for an investment firm, a financial professional, or an individual working from home, and the forex market is a global marketplace that can be accessed from anywhere. To put it simply, it all comes down to the value of the currency being traded – will that value go up, or will it go down? The value of a currency depends on countless factors such as local and global politics and economics, much like the value of stocks. Just like with stocks, in order to make a profit you want to buy a currency when its value is low, and sell a currency when its value is high.

What sets forex apart from other kinds of trading?

Several characteristics make forex trading, or currency trading, a unique opportunity. These include:

v  Massive trading volume (largest and most liquid financial market on the planet)

v  Geographic diversity (major trading centres include New York, London, Tokyo, Hong Kong, and Singapore).

v  Continuous operation (when the Asian market closes, the European market opens, so trading is available twenty-four hours a day)

Leverage use to increase profits, regardless of the amount of money involved

Another unique characteristic of forex trading is that it involves buying and selling things called currency pairs rather than individual currencies. Why? Good question. The answer is rooted in the name of the game – foreign exchange. In order to exchange a currency, it’s necessary to exchange it into something else, and that’s why it’s necessary to buy or sell a pair of currencies.

Let’s take a look at a few examples. The most popular currency pair is the euro (EUR) and the United States dollar (USD). This currency pair is written EUR/USD. The first currency listed in a pair – in this case, the euro – is known as the base currency, which is being quoted in relation to the second currency – in this case, the United States dollar – of the pair, which is known as the counter or quote currency. In other words, the price of the euro is being expressed in U.S. dollars. So if the EUR/USD price is listed at 1.3189, this means that one euro is being valued at 1.3189 U.S. dollars.

Other popular pairs include the British pound (GBP) and the USD, which is written GBP/USD; the New Zealand dollar (NZD) and the USD, which is written NZD/USD; and the USD and the Japanese yen (JPY), which is written USD/JPY. The value of each of these pairs is determined by numerous factors such as international relations, current events, politics, and the various economic issues that affect the countries involved.

Remember, trading isn’t limited to forex; It’s also possible to trade commodities such as gold and silver, as well as stocks and even the various stock indices across the globe.

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