The term ‘Forex’ stands for Foreign Exchange. Forex trading in simple terms is the trading in currencies from different countries against each other; for example the US Dollar against the Euro. So Quite simply, forex trading is the act of buying and selling currencies. This is the world’s largest financial market with a daily turnover of $5 trillion and it involves many people – and many currencies. Because you are always buying one currency using another currency, you trade ‘currency pairs’.
The aim of forex trading is simple. Just like any other form of speculation, you want to buy a currency at one price and sell it at higher price (or sell a currency at one price and buy it at a lower price) in order to make a profit. Some confusion can arise as the price of one currency is always, of course, determined in another currency. For instance, the price of one British pound could be measured as, say, two US dollars, if the exchange rate between GBP and USD is 2 exactly.In forex trading terms this value for the British pound would be represented as a price of 2.0000 for the forex pair GBP/USD. Currencies are grouped into pairs to show the exchange rate between the two currencies; in other words, the price of the first currency in the second currency.Some commonly traded forex pairs (known as ‘major’ pairs) are EUR/USD, USD/JPY and EUR/GBP, but it is also possible to trade many minor currencies (also known as ‘exotics’) such as the Mexican peso (MXN), the Polish zloty (PLN) or the Norwegian krone (NOK). As these currencies are not so frequently traded the market is less liquid and so the trading spread may be wider.
The foreign exchange, or forex, market exists to allow the global trading of international currencies. By aggregating buyers and sellers, the market establishes the relative value of each currency against a range of other currencies. Currency conversion is essential to facilitate international trade, but the Forex market also enables direct speculation on the relative value of individual currencies. That is, it allows traders to buy and sell specific currencies with a view purely to making a profit.When a currency is strong in the forex market, it is generally trading at a high exchange rate against other currencies, and its price is generally rising. When a currency is weak in the market it is generally trading at a low exchange rate against currencies, and its price is generally falling.AFTER POST CONTENT
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