What is Forex or Foreign Exchange?

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/ April 30th, 2019

What is Forex or Foreign Exchange?

Forex (Foreign exchange) is a highly liquid and trending market nowadays. In Forex Trade there are trillions of dollars exchanged on daily basis. Forex market is global and decentralized where all currencies of the world trade in.

In this article, you will learn about the Foreign exchange, the importance of Forex Market, Forex trade and a few basic terms used in Forex.

Unlike other markets, Forex Market provides you with exciting opportunities for trading. Whenever you consider a currency might increase, you buy that currency easily and also selling a currency which is considered to decrease in values. Forex Trading allows you to speculate on the comparative strength of one currency against others.

There are two major tiers in the Forex Market; the first one is an interbank market where currencies of different countries are exchanged by the biggest banks. The other one is the over-the-counter (OTC) market where companies and individuals can trade.

Forex Trade is very high volatile as it creates many trading options.  Forex Traders can easily switch to any trending currency to gain a profitable return on their trades, also a wide number of currency pairs are available in the Forex Market to choose including major, minor and emergent currencies.

If you are not willing to take a big risk then you can trade without the fear of losing your capital with the demo account.  You can access Forex Market 24-hours using a broker.

Basically, the Broker is a company between the trader and the market with the aim to facilitate the trader. Brokers provide the Leverage to trade larger amounts than the trader’s account balance. When you are using Leverage then you must set the required margin for your trade.

The margin is the amount required as a good faith deposit to hold opened position. But it doesn’t mean that you can increase your profit potential using Leverage, It can also increase the chances of losses. If you are new to Forex Trade, then start trade with lower Leverage ratios until you are feeling comfortable to trade big.

For a better understanding of Forex, consider an example that you are going to buy American’s dollar it means you are buying a “share” in the economy of America. You are making a bet that the currency of America is doing well. If American’s currency goes up when you sell those “shares” back to the Forex Market and you will earn a profit in this trade.  

Keep in mind that Forex Market may offer excitement to the trader, but the risk factor will also increase directly proportional. If you want to gain more profit from the Forex Market then you must research in-depth to analyze the trends of the Forex Market. Forex provides you with flexible transaction sizes which include standard, mini, micro and nano lot sizes.

A number of online trading platforms are available to facilitate the Forex Traders providing the facility to automate their trading using algorithms. To facilitate traders, Forex Trade is also available on tablet and mobiles. The graphs and the indicators provide a clear understanding of the market ups and downs with respect to different time frames. You can trade in products with Forex rather than currencies.

 

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