The foreign exchange market is a market place to buy and sell different currencies. It occurs over the counter through the interbank market rather than a centralized exchange.
You may have unknowingly participated in forex treading by ordering imported shoes or buying foreign money for holidays.
Traders get attracted to a forex market because of several reasons such as:
- Size of the forex market
- Different volatility level
- Different currencies to trade-in
- Low cost per transaction
- Open all 24 hours a day for 5 working days
If you are new to forex trading, then this article will help you learn it.
First, you should know the base and then gradually enter the trading world.
Forex market explained
In simple words, the foreign exchange market is just like the other markets depending on demand and supply.
For instance, if there is a huge demand for the US dollar from European people with Euros, they will get Dollars in exchange for Euros.
So, the US dollar value will rise and the euro will fall. But, remember for some other pair USD may be depreciating.
How does the forex market move?
The above given example is just one of the major ways which make the FX market move.
There are several factors that impact the forex market and make the movement take place for instance election of a new president, GDP, unemployment, inflation, etc.
You can take the help of the economic calendar to stay updated and do good trades.
Why is the forex market so appealing?
The forex market permits all big and small banks, financial institutes, retail, and government traders to exchange one currency for another through interbank markets.
The trade is done between global banks round the clock. If the Asian trading session comes to an end, the European and UK banks become available.
A complete trading day ends when the US session follows the Asian session for another day
According to a reliable broker and a uBanker review, another thing that makes the market more appealing to traders is its liquidity.
On average, the daily trading volume of the forex market is $5.1 trillion. It means that traders can easily enter and exit at any time as there are a plethora of buyers and sellers on the exchange.
How does forex trading works?
A lot of people want to earn money through forex trading. Luckily, the trading basics are quite simple.
If you think that a particular currency will go up, then purchase it.
It is called long. If you think that the currency is going to go down, then sell it. This is called short.
Who trades forex?
Majorly there are two kinds of traders in the foreign exchange market who go for it: speculators as well as hedgers.
Hedgers don’t go for extreme movement and look forward to lowering their exposure to the movements in foreign currency.
Speculators, on the contrary, are risk-takers and then look for volatility in the market and take complete benefit of it. This includes big financial institutes and retail traders.