WHAT IS FOREX?
THE BASICS OF FOREX
Forex Trade stands for Foreign Exchange whereby market is used to exchange one currency for another.
Have you Ever heard of the New York Stock Exchange? its 200X the size of that. Normally Daily there is approximately 5 Trillion Dollars traded across the Forex market in a 24 hour trading day. Even if you combined all the stock, bond AND equity markets together, you still wouldn’t come close to the total size of the Forex market. The Forex market is truly immensecompared to any other financial market in the world.
It can get confusing if you’re not educated on it, but honestly it’s fairly straight forward. In fact you would have already used the Forex market if you:
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It’s important to know currencies are bought and sold in pairs. Unlike the stock market, currencies are traded in pairs. For example, EUR/USD being the Euro vs the US Dollar. Compared to stock trading where you can buy or sell a single stock, the foreign exchange market is slightly different, in the foreign exchange market you have to buy one currency and sell another currency.
An example of a few of the major currency pairs are:
- EUR/USD – Euro vs US Dollar
- USD/JPY – US Dollar vs Japanese Yen
- GBP/USD – British Pound vs US Dollar
- USD/CHF – US Dollar vs Swiss Franc
- AUD/USD – Australian Dollar vs US Dollar
- USD/CAD – US Dollar vs Canadian Dollar
- NZD/USD – New Zealand Dollar vs US Dollar
Basically when you are trading currencies, you are essentially comparing one price against another price. A good example would be if you was trading GBP/USD, as a trade you would be buying GBP (British Pound) whilst selling USD (US Dollar). Meaning we profit from how much the British Pound increases in comparison to the US Dollar.
In the market we make money based on our predictions of which way the market will go, in the foreign exchange market there are two types of trades. As an example, i’m going to use the currency pair EUR/USD:
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