What is Forex Trading?


Forex is the settlement of transactions in any one currency for delivery of another. Its settlement system is mainly used by banks, funds, and individual traders to help them invest in stocks, commodities, currencies, trade borrow, lend borrow, lend cash or other financial instruments. Trading foreign exchange on the Forex market can be an exciting and profitable opportunity, but it is also risky. With good knowledge of operating in the marketplace, you will significantly reduce your risks. Forex trading is a challenging and complicated process that requires research, and every trader needs to understand the basic concepts before starting to invest.

For many first-time traders, the Forex market seems confusing. Forex directly refers to the Foreign Exchange Market; it’s the place where you can trade currencies from all over the world. When you trade Forex via a trading platform, you buy one currency and sell another simultaneously, which is why currencies are always displayed and quoted in pairs such as EURUSD. Various factors such as economics and geopolitics influence the Forex market, meaning exchange rates fluctuate, so currencies rise and fall against each other. By forecasting the direction currency are likely to take, you have the opportunity to make a profit. So, you might decide to buy the Euro and sell the US dollar, anticipating that the Euro will rise versus the dollar. You buy a number of units of euros for your dollar, and your forecast proves correct, and the Euro does rise, so you close your trade and make a profit.

Remember, though, if you are wrong and the Euro falls against the dollar, you will lose the money. Forex trading is full of opportunities; it is the largest and most liquid market, regulated forex broker over 5 trillion dollars every day. This high liquidity makes it easier to buy and sell currencies. Forex is also a global market. One highlighting aspect of this international market is that there is no central marketplace for foreign exchange. It starts after 6:00 am Sydney time and ends at 5:00 pm Friday at New York time. It means you can trade 24 hours a day, five days a week. The currency pairs are traded worldwide in the major financial centres of London, New York, Tokyo, Zurich, Paris, Hongkong and Sydney. With the influence of geopolitics, economics, as well as inflation and interest rates, this market offers enormous opportunities.

Advantages of Forex Trading:

  • A trader can trade 24 hours a day.
  • It is a market with high liquidity.
  • Leverage can make your money go further.
  • Trade with a wide range of currency pairs.
  • Accessibility of tools to help you trade.
  • Hedging with Forex.
  • High volatility.