What is Forex ? – Foreign Exchange, also known as Forex or currency trading is a decentralized market platform where the entire world’s currencies trade.
Being the largest and most liquid market in the world, the daily trading volume in forex encompasses $5 trillion. The entire world’s stock markets are not even close to this.
This means that there are opportunities available with forex which you might not find in others.
IT iS ALL about EXCHANGE
Travelled overseas? If yes, then you’ve surely made a forex transaction. When you exchange currencies, the forex exchange rate between the two currencies determines how much value you get for your currency in terms of the foreign currency. The exchange rate continuously fluctuates.
MAKING MONEY WITH FOREX
Like shares, one can trade currency on the basis of its value. For instance, if the value of the currency is to increase, you can buy it and keep it and if you think the value will decrease, you can sell it.
And the best part is that in the Forex market, finding buyers and sellers is much easier.
As mentioned above all forex trades involve two currencies. It is a sort of bidding on the value of a currency against another. Let’s take the example of GBP/USD.
When you see a price quoted on forex platform, it shows the value of both the currencies in parallel with each other. There would be two prices. Buying and selling price.
The difference in the value between them is the spread. As you click buy or sell, you are buying or selling the currency in pair.
As you begin trading, you borrow the first currency in pair to buy or sell the second currency pair. The liquidity is so deep in forex that liquidity providers like big banks allow you to trade with leverage.
In trading with leverage, all you do is simply set aside the required amount as margin for your trade size. We shall explain it in detail. But remember, leveraging doesn’t mean that you are only increasing your profit potential. It can also increase your losses.
It is therefore advisable to begin trading with small leverage ratios until you are comfortable in forex trading.
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