Forex, short for "foreign exchange", is an international market where currencies from around the world are traded. Its specialty is that it operates 24 hours a day, five days a week, providing an opportunity for traders and investors to trade at any time of the day. The daily trading volume in the Forex market exceeds 500 billion US dollars, making it one of the largest and most liquid financial markets in the world.
On Forex, currencies are always traded in pairs, where one currency is the base currency and the other is the quoted currency. For example, for the EUR/USD currency pair, the base currency is the euro and the quoted currency is the US dollar. The price of this pair reflects how many US dollars are needed to buy one euro.
What is foreign currency trading
Forex trading is the process of buying one currency while selling another in order to profit from changes in the exchange rate. Traders can speculate on the appreciation or depreciation of a currency and capitalize on the difference in prices.
There are several types of currency pairs, including
- Major currency pairs: EUR/USD, USD/JPY, GBP/USD, USD/CHF;
- Minor currency pairs: currency pairs that do not include the US dollar;
- Exotic currency pairs: pairs that include currencies of developing countries;
- Regional currency pairs: pairs that include currencies from the same region.
Understanding the base and quoted currencies helps traders to determine the value of a currency pair and decide on a trade. The base currency is the currency that is listed first in the pair, while the quoted currency is listed second. For example, in the EUR/USD pair, the base currency is the euro and the quoted currency is the US dollar.
The Forex market provides unique opportunities for traders and investors, allowing them to make money on currency exchange rates. Understanding the basic concepts and principles of Forex trading will help traders make more informed decisions and achieve success in this dynamic and exciting market.
