The foreign exchange market, which is also referred to as the Forex market, has established itself as one of the world’s most traded financial markets. The platform ensures clients have the best education, tools, platforms, and accounts to navigate the market while getting the option to trade Forex. Are you not sure where to start with Forex? If yes, you’re in the right place to get further information from reviewfx. Find everything you need to know about Forex trading, the way it works, and the method you need to follow to start trading.
What is Forex?: a detailed insight
Forex, a short form for foreign exchange, serves as the transaction of changing one currency into another currency. The process is inclusive of reasons including commercial and tourism, and to serve the motive of continuing international trade. Forex gets traded on the Forex market, open to buy and sell currencies 24 hours a day, five days a week. The entities involved in the same are banks, businesses, investment firms, hedge funds as well as retail traders.
A highlight of the Forex market
The Forex market has established itself as the largest and most liquid financial market in the world, which has an estimated average global daily turnover worth US$6.5- trillion — and has risen from $5 trillion just a few years ago. There is a need to note one critical feature of the Forex market, and that is that there is no central marketplace or exchange in a central location. The reason behind the same is that all the trading happens electronically via computer networks. The entity is referred to as the counter (OTC) market.
Understanding Currency Pairs
Transactions made on the Forex market are inclusive of the simultaneous buying and selling of two currencies.
The ‘currency pair,’ made up of a base currency and a quote currency, allows selling one to purchase another. Also, it’s worth noting that the price for a pair is how much of the quoted currency it costs for buying one unit of the base currency. In this regard, it can be said that there is a possibility to make a profit by correctly forecasting the price movement of a currency pair. Also, it’s worth considering that the FXTM offers hundreds of combinations of currency pairs to trade and is inclusive of the majors popular as the most used traded pairs in the Forex market. The entities involved in the same include the US Dollar against the Japanese Yen, the Euro against the US Dollar, and the British Pound against the US Dollar. Also, for wholly understanding the process, there is a need to note that For most currency pairs, a pip serves as the fourth decimal place, the main exception being the Japanese Yen. In that case, a pip is the second decimal place.
When it comes to the Forex market, there’s a point one needs to understand, and it is: trades in currencies are often worth millions. This is the reason why small bid-ask price differences add up to a significant profit. Also, it’s worth understanding that these large trading volumes mean a small spread equating to significant losses.