What is Forex?
Information is not investment advice
Forex, FX – short for ‘foreign exchange’ – is trading currencies of different countries against each other. Forex is one of the largest global financial markets for trading various currencies. It assists international trade and investments via foreign exchange transactions. In 2016 daily FX volume accounted for $5.1 trillion, according to data from the Bank of International Settlements (BIS).
There are many different players in the FX market. Some trade to make profits, others trade to hedge their risks and others simply need foreign currency to pay for goods and services. The main participants of trading are commercial banks, that is why currency quotes are set at the interbank market. Apart from large commercial and central banks and multinational companies, there are also many risk-seeking investors who are always ready to engage in different sorts of speculations. Among them are typical retail traders – individuals, who trade on the daily/weekly basis with the goal of making profits. Many of them scrutinize economic and political news, statistical releases and public engagement of influential persons to decipher the future movement of currency’s prices. Others rely on technical indicators without paying any heed to what is happening in the world of finances. You are also able to become a Forex trader and join this class of currency entrepreneurs.
Forex market is decentralized. In other words, there is no physical location where investors go to trade currencies. Forex traders use the internet to check the quotes of various currency pairs from different dealers. Financial centers around the world – London, New York, Tokyo, Hong Kong and Singapore – function as anchors of trading between a wide range of different types of buyers and sellers. To obtain access to interbank currency market you will need to turn to a Forex broker.
FX trading is typically done through brokers. Brokers are companies providing individuals with access to the market. In other words, a broker gives you a special software program, where you can see live currency quotes and are able to place orders to buy/sell currencies with just a few clicks. When you decide to stop your trade, the broker closes the position on the currency market and credits your account with the gain or loss. It will take you only a couple of minutes to open an account with the Forex broker of your choice and begin your trading career. As a reward for the services, a trader pays to his broker spread or commission or both.
When choosing a broker, pay attention to the company’s goodwill, age and regulation. For instance, FBS is providing high-quality services to its clients since 2009 and is widely recognized as one of the market leaders. In addition, it’s important which trading conditions a broker offers.
This tutorial is created to acquaint you with Forex basics and explain you in simple terms how to trade currencies. This will be your first step in becoming a successful Forex trader. Please check our next courses to further develop your trading skills.
2023-03-20 • Updated
Other articles in this section
- How to open a trade in MetaTrader?
- Demo accounts
- MACD (Moving Average Convergence/Divergence)
- How to determine position size?
- Leverage and margin
- Swap and rollover
- Transaction, profit, loss. Types of orders
- Economic calendar
- Bid and Ask price. Spread
- Calculating profits
- How to trade?
- Currency pairs. Base and quote currencies. Majors and crosses