What Is Forex Archive

Understanding Forex

Currency Trading

Forex is a market place where national currencies are traded 24 hours a day, except over the weekend. Forex is the common name for the foreign currency exchange market, though it is also known as FX or the currency market. It is the single largest market in the world, in terms of volumes traded. Trading is driven by its global nature, 24-hour open access and the huge number of traders, which include large banks, hedge funds, insurance companies, multinational companies, central banks and private individuals.

Currency Pairs

Forex involves trading currency pairs. Common currency trading pairs are the US Dollar and British Pound (USD/GBP) and the Euro and the US Dollar (EUR/USD). The range of currency pairs is much wider however, with national currencies being traded throughout the world, every day. Forex trading involves speculation on the relative strength or weakness of one currency compared to another.

Forex Speculation

Forex can be trades on a speculative basis, which is to say without direct ownership of the underlying financial instruments, the currencies. Spread betting, for example, involves speculating on the direction of a price trend, with potential profits being determined by the correct anticipation of a rise or fall and the extent of the fluctuation. Spread betters are able to speculate on both rising and falling markets.

Spread betting and other types of forex speculation often use leverage. Leverage means the deposit used to open a bet is translated into a larger financial position in the marketplace. Leverage is inherently risky, because while it can lead to magnified profits, it can also result in significant losses.