The Forex Market
The Forex Market
The Forex Market
Forex trading is the trading of currencies from different countries against each other.
Forex is the acronym of Foreign Exchange.
There are a lot of currencies in the world, for example in Europe, they call their currency Euro (EUR) and in the United States, the US Dollar (USD). So, if you are in Los Angeles you would need to buy Euro and simultaneously selling your Dollars (usually your bank is doing this for you by converting). This process is called "going long on the EUR/USD"
Usually, the forex trading can be done through a broker or market maker. As a forex trader you pick a currency pair that you expect to change in value and trade accordingly.
You can place an forex trade on the market which is called 'orders'. With a few clicks, the broker then passes the order along to a partner in the Interbank Market to fill your position (just a simple term that means, fulfilling what you wish to buy and sell). This is all a bit like casino: you are thinking that a certain currency pair will go up, but then it goes down. In that moment, the broker closes the position on the Interbank Market and credits your account with a loss - or you are lucky and calculated it well, the currency pair goes up and you make a gain and the broker credits your accounts. Believe it or not, but this can all happen within seconds.
Once you decided to enter into forex (foreign exchange) trading, there are cool advantages:
1. "The market is open 24/7"
Try to imagine you go to a real market, but you need to do so before 8pm because it will close then. This is not the case with forex; since the market is worldwide, trading goes on continuously. Somewhere around the world, a financial center is open for business, and banks and other institutions exchange currencies, every hour of the day and night with generally only minor gaps on the weekend. . Usually, markets open in Australia on Sunday evening, and ends after New York hits the Friday evening clock, in between it passes the time zones in Sydney, Tokyo, Hong Kong, Singapore, Moscow, Frankfurt-on-Main, London. Essentially foreign exchange markets follow the sun around the world, giving traders the flexibility of determining their trading day.
(photo courtesy: gainscope.com) |
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