About Forex

Forex (FOReign EXchange Market)

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.

You should always keep in mind that the Forex market is volatile and carries substantial risks.

Currencies are traded in pairs, which are called “currency pairs”. The first currency in the pair is called the base currency and the second currency in the pair is called the quote or counter currency. The most popular currency pair in the world is EUR/USD, where EUR is the base currency and USD is the quote currency. When you see a price quoted on your platform for EUR/USD, that price shows how much 1 EUR is worth in US dollars. You always see two prices on your platform: one is the buy price and the other one is the sell price. The difference between the two is the spread. When you click buy or sell, you are buying or selling the base currency in the pair.

Forex trading is conducted over the counter. The forex market is open around-the-clock, 5 days a week.

International Forex (Foreign Exchange) Market is one of the most flexible tools for currency trading.

You will not face requirements for going short on a particular currency pair or position size limits. There are no intraday trade restrictions on going long and short; however, it does not mean that earning in the Forex market is easy.

Currency trading implies understanding of both the trade principles and factors that affect the value of currencies. For successful trading in Forex, each trader should possess information and a strategy. The starting point is the selection of the best trade instrument—a currency pair that combines low spread and sufficient predictability.

Today, about 75% of transactions are conducted for the major currency pairs—that is, the currencies of countries with the most advanced economies. The most traded currency pair is EUR/USD (euro/US dollar). When making a BUY transaction for EUR/USD (buying), you gain profit if the euro rises against the dollar. When selling (making a SELL transaction), your profits will increase if the value of the euro falls.

In most cases, traders choose brokerage companies for online trading. A broker, in its turn, provides leverage if the amount in the trader’s account is not less than the margin. For example, a trader with 1,000 US dollars can get relatively large leverage at the ratio 1:100, and in case of a successful transaction their profit will be 100,000 dollars.