FOREX or FX is an abbreviation for the Foreign Exchange market. This is the largest financial market in the world today with a daily turnover of more than 4 billion US dollars. For example, the famous New York Stock Exchange has a daily turnover of around 25 bullion US dollars. This is a clear sign of the size and the liquidity of this market. Thanks to the advance in internet technology Forex trading is now available for everyone – companies, investment managers and independent participants.
According to many sources many of the world’s billionaires made money on Forex-type financial markets.
What can you trade on Forex?
Forex trading is mainly focused on currency trading. This type of trading is actually a type of simultaneous buying and selling of currencies. These trades are completed through brokers, dealers and/or internet platforms. For example, you are buying the currency through currency pairs USD/EUR, GBP/JPY and other pairs. The profit comes as a result of successful exchanging of currency pairs. Although this type of trading might sound complicated to those who are new in forex trading, the fact is that working on these markets doesn’t require much knowledge and investment. However, it is good to point out that just like any other form of trading, forex trading comes with certain risks.
Currencies are always indicated in pair. Trading with currency pairs is easy – each time when a transaction of buying one currency of the pair takes place, the other currency from the pair is sold. Just like we have mentioned before, there are many combinations – USD / CHF, EUR / USD etc.
The first currency in the pair is called base and the other one is called minor currency.
Buying and selling always refers to the base currency. If you are buying a pair of USD / EUR this means that you are buying USD and selling EUR and if you are selling a USD / EUR pair, this means that you are selling dollars and buying Euros. The established exchange rate of two currencies is the ratio that reflects the state of one country’ economy compared to some other country’s economy.
Unlike other stock exchanges like the ones located in New York City, Tokyo, Frankfurt, London and other cities, Forex is not centralized. Forex is often described as over the counter market or even interbank market, due to the fact that it takes place electronically through the banking network 24 hours a day. There are many things that make Forex trading and Forex market unique like: huge liquidity, enormous turnover, large number and diversity of participants in the trading process, geographical dispersion, almost 24/7 working hours, diversity of factors that affect the currency rates etc.
By the end of the last millennium, this type of trading was available only for the big companies. Thanks to the advance in technology, development of global networks this market became available for everyone. All you need is an internet connection and a small investment.
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