Knowing the answer to the ‘what is Forex’is necessary for many businesses since currencies have to be exchanged in order to facilitate trading and business worldwide. If you stay in US and want to buy a local product from Australia, you can’t do it in terms of US dollars. You will need Australia dollars and that is why your US dollars need to be exchanged into Australian dollars. The same goes for the travelers and everyone doing business, trade or purchasing in foreign countries.
What is Forex market?
Forex is a term which you come across frequently in your daily life. But have you ever asked yourself what is Forex? Forex stands for Foreign exchange and the Forex market is the place where the currencies are traded. The big need of exchanging currencies became the primary reason why the Forex market is the largest in the world. The huge size of the market makes it also the most liquid financial market in the world. It is far bigger than the other markets like stocks, commodities etc. The average daily transaction goes well above 4 trillion dollars a day in Forex market.
One of the most unique aspects of the Forex market is that there is no central place for the foreign exchange. Currency trading is conducted electronically over the counter which means that all the Forex transactions are conducted through the computer networks between the traders around the world without any central exchange in place. The Forex market is open 24 hours a day and five and a half days a week. This helps the traders to trade in the hours when they feel convenient.
How to trade Forex?
After you understand what is Forex market, it is important to understand how the currencies are traded. Forex currencies are traded in pairs, for example USD/EUR, USD/JPY etc. The price of one currency is determined relatively to the other in the pair. A Forex trader considers the fluctuations in the price of the pair he is concerned and takes position in the market according to it.
Today online Forex trading is popular and most of the traders today perform online Forex trading. It is convenient to search for an online broker today through internet and opening a Forex account with him to start trading. But a careful selection of a genuine broker and a suitable trading platform is required. Care should be taken to avoid fraudulent or dishonest Forex brokers and for this purpose only regulated Forex brokers have to be chosen.
But becoming a successful Forex broker is not so easy and understanding what is Forex trading is not just enough. Forex trading requires the use of some successful strategies and maintenance of discipline by a trader. Planning and selection are two important things which should never be ignored in Forex trading.