Everything you wanted to know about Forex.

Forex is the global market where currencies are traded. The Forex market is the world’s largest and most liquid market, with an average daily trading volume of more than $5 trillion. All forex trades involve two currencies, as you are speculating on the value of a currency against another. Exchange rates are determined by the market forces of supply and demand and are affected by geopolitical and economic events around the globe.

If you expect that a currency will rise in value, you can buy that currency (open a long position), with the prospect of selling it at a higher price, if the market moves in your favour. If you expect that a currency will depreciate in value, you can sell that currency (open a short position) and then if the price indeed falls, you can buy it at a more favourable price.

The basis of currency trading on the Forex market is the so-called ‘currency pairs’ or the price of one currency against another currency in a given pairing. The most popular pair is EUR/USD, or the ratio of the exchange rate of euro to the US dollar. It accounts for about 80% of trading on the Forex market. Such pairs as GBP/JPY, EUR/JPY, and GBP/USD are also popular among individual traders because of their strength and high volatility.