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What is forex?

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What is forex?


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What is forex?

If you've ever gone on holiday and exchanged say, pounds for euros, then you've participated in the forex market. Simply put:

 

Forex is how individuals and businesses convert one currency to another.

 

Forex

Forex, also known as foreign exchange, FX or the currency market, is the largest financial market in the world. On average over $5 trillion worth of transactions take place every day. That's around 100 times more than the New York Stock Exchange (NYSE) - the world's biggest stock exchange.

 

As well as being traded by individuals and businesses, forex is also important for financial institutions, central banks, and governments. It facilitates international trade and investment by allowing companies that earn money in one currency to pay for goods and services in another.

 

Who trades forex?

There are a huge number of market participants looking to trade forex at any particular time, from individual speculators wanting to turn a quick profit, to central banks trying to control the amount of currency in circulation.

 

However, by far the most significant players in the forex market are the major international banks. Between them, Citigroup, Deutsche Bank, Barclays, JPMorgan and UBS account for around 50% of global forex trade.

 

Euromoney FX Survey

Why do people trade forex?

Individuals and businesses participate in the forex market for two main reasons:

 

Speculation

The vast majority of forex transactions are made simply to make money. This means the person or institution making the trade has no plans to take delivery of the currency, they are just looking to turn a profit on movements in the market.

 

With major financial institutions always looking to profit from small changes in forex prices, many large trades can occur throughout the day. This activity means currency rates are some of the most consistently volatile financial markets in the world - which in turn provides more opportunity for speculators to make money.

 

Purchasing goods or services in another currency

Every time a transaction is made between two entities in different regions, a foreign exchange transaction needs to take place to pay for the goods or services exchanged. Transactions such as this happen globally, every second of every day.

 

Despite the number of transactions, the amount of currency traded is often very small compared to trades made by large speculators. Therefore commercial trading tends not to have such a big effect on short-term market rates.

 

How do you trade forex?

Unlike share trading, forex is an over-the-counter (OTC) market. This means that currencies are exchanged directly between two parties rather than through an exchange.

 

The forex market is run electronically via a global network of banks - it has no central location, and trades can take place anywhere via a forex broker of your choice. This also means that you can trade forex at any time, so long as it's during trading hours in any one of the four major forex trading centres (London, New York, Sydney and Tokyo).

 

Forex trading hours: April-October (UK time)

Forex Trading Hours

In practice, that means you can trade most forex pairs from around 21:00 or 22:00 (UK time) on Sunday to 21:00 or 22:00 (UK time) on Friday, every week. The exact times can vary due to daylight saving time changes in the UK, USA and Australia.

 

How does a forex trade work?

Forex prices are always quoted in pairs such as AUD/EUR, which stands for the Australian dollar versus the euro. This is because if you want to purchase Australian dollars you need to buy them with another currency, like euros.

 

When trading forex you are simultaneously BUYING one currency while SELLING another.

 

 

Lesson summary

Forex is how individuals and businesses convert one currency to another

The main players in the market are major international banks

Speculation accounts for the vast majority of transactions

It's an over-the-counter (OTC) market, where trades take place directly between two parties rather than through an exchange

Forex is traded in pairs - you are simultaneously buying one currency while selling another

The first currency in every pair is the base or primary currency. The second is the quote or counter currency

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আপনার পোস্টটি প্রিমিয়াম কন্টেন্ট এর আওয়তায় পড়ে।  যদি সিগনাল সেলার হউন, পারফর্মেন্স ভালো থাকে, তাহলে নিয়মিত ভাবে সিগনাল পোস্ট করুন, প্রফিট/লস রেসাল্ট রেকর্ড দিন। বিডিফরেক্সপ্রো আপনাকে সাহায্য করবে ব্যবসা করতে। ধন্যবাদ;  

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টপিকটিতে মন্তব্য করতে সাইন ইন করুন অথবা নতুন একাউন্ট করুন

মন্তব্য করতে আপনাকে অবশ্যই মেম্বার হতে হবে

একাউন্ট করুন

খুব সহজে একাউন্ট করুন


নতুন একাউন্ট রেজিস্ট্রেশন

সাইন ইন

ইতিমধ্যে একাউন্ট করেছেন ? সাইন ইন করুন


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