What Is Forex?
By: Lisa
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Learn what the Foreign Currency Exchange Market (Forex) is and how to trade on the Forex market.
Would you like to know what Forex is?
Forex is a term used for the Foreign Currency Exchange Market. The Foreign Exchange market is the largest financial market in the world. It is also commonly referred to as Forex, FX, and 4X. It has a volume of over $3 trillion a day. It actually has over 3 times more trading volume than the total amount of the stocks and futures markets combined! We will provide you with all the information and training you need to understand the Foreign Currency Exchange market.
What is traded on the Foreign Currency Exchange?
Currency. Money. Cash. Moolah. Dough. That’s it. Forex trading is the simultaneous buying of one currency and the selling of another. Currencies are traded through a broker and are traded in pairs; for example the Euro dollar and the US dollar (EUR/USD) or the Swiss Franc and the New Zealand Dollar (CHF/NZD).
Trading on the Foreign Exchange can be a bit confusing because of the dual pricing, but look at it this way: You are essentially taking your hard earned US Dollar to a bank, exchanging it for Canadian Money at the current rate. During the day, week, or month, the Canadian Dollar gets stronger compared to the USD, and then you exchange it back, and wind up getting a little more back than you originally exchanged. This is known as buying, buying long, going long, long position, etc. We will provide more information on that later.
Conversely, much like stocks and futures, you can also go short, sell, sell short, etc. This is the reverse of a long position. This time you want the price to go down, not up. Yes, you can make money going both directions! Again, we will show you more information about that later.
Unlike stocks or futures, the Forex market has neither a physical location nor a central exchange. The Forex market is considered an Over-the-Counter (OTC) or 'Interbank' market. This is due to the fact that the entire market is run electronically, within a network of banks, continuously over a 24-hour period. At any time, 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. And with the internet, online brokers will trade 24/5, with only minor gaps on the weekend, from Friday evening to Sunday evening in the USA. With stocks and futures, you have a limited trading time each day, from the opening bell to the closing bell. The Forex market opens on Sunday evening and closes Friday afternoon!
Now you know what Forex is. Stick around and keep learning and mastering Forex with us here at PipsAngels.com.
