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ForexTrading

What is Forex

In its most basic sense, the forex market has been around for centuries. People have always exchanged or bartered goods and currencies to purchase goods and services.

Foreign exchange is the process of changing one currency into another for a variety of reasons, usually for commerce, trading, or tourism. The foreign exchange (also known as FX or FOREX) market is a global marketplace for exchanging national currencies.

Because of the worldwide reach of trade, commerce, and finance… forex markets tend to be the largest and most liquid asset markets in the world.

Currencies trade against each other as exchange rate pairs. For example, EUR/USD is a currency pair for trading the Euro against the US Dollar. One unique aspect of this international market is that there is no central marketplace for foreign exchange.

Rather, currency trading is conducted electronically over the counter (OTC), which means that all transactions occur via computer networks among traders around the world, rather than on one centralized exchange. The market is open 24 hours a day, five and a half days a week, and currencies are traded worldwide in the major financial centers of Frankfurt, Hong Kong, London, New York, Paris, Singapore, Sydney, Tokyo, and Zurich—across almost every time zone. This means that when the U.S. trading day ends, the forex market begins anew in Tokyo and Hong Kong. As such, the forex market can be extremely active any time of day, with price quotes changing constantly.

Types of Forex Markets

  • Spot forex market: The physical exchange of a currency pair, which takes place at the exact point the trade is settled – i.e., ‘on the spot’ – or within a short period of time
  • Forward forex market: A contract is agreed to buy or sell a set amount of a currency at a specified price, to be settled at a set date in the future or within a range of future dates
  • Future forex market: A contract is agreed to buy or sell a set amount of a given currency at a set price and date in the future. Unlike forwards, a futures contract is legally binding