Forex

What Is Forex Trading?

• Forex trading involves buying one currency and selling another with the aim of making a profit.

• Currencies are traded in the foreign exchange market (forex or FX), which operates globally.

• Here’s how it works:

  • Traders buy a currency pair (e.g., EUR/USD) and speculate on its price movement.

  • Exchange rates constantly fluctuate based on supply and demand.

  • The forex market is open 24 hours a day, five and a half days a week.

Key Points:

1. Market Structure:

   • The forex market lacks a central marketplace.

   • All transactions occur electronically over the counter (OTC) via computer networks.

   • Major financial centers worldwide participate, including Tokyo, London, New York, and Sydney.

2. Currency Pairs:

   • Currencies trade against each other in pairs (e.g., EUR/USD).

   • Each pair represents the exchange rate between two currencies.

3. Market Types:

   • Spot Market: Immediate exchange at the current rate.

   • Derivatives Market: Offers forwards, futures, options, and currency swaps.

4. Why Trade Forex?:

   • Hedging: Manage international currency and interest rate risk.

   • Speculation: Bet on geopolitical events or price movements.

   • Portfolio Diversification: Include forex for balance.

5. Continuous Trading:

   • The forex market operates nonstop across different time zones.

   • Price quotes change constantly.