Forex is an acronym for Foreign Exchange Market. It is a platform where a nation’s currency is traded with that of another. In simple sense, it may be phrased as simultaneous purchase and sale of currency between nations. Forex allows easy transactions for banks and other institutions, in terms of buying and selling of currencies. Forex supports international trade and investment by helping businesses convert one form of currency to another.
Currencies all over the world don’t follow a fixed pattern of exchange rate and keep fluctuating. This in turn affects the investors in foreign exchange similar to stock markets. Investments usually deal with four major pairs of currencies known as the”blue chips” of Forex market. These are: Euro against US dollar (EUR/USD), US dollar against Japanese yen (USD/JPY), British pound against US dollar (GBP/USD), US dollar against Swiss franc (USD/CHF) and many more.
Forex is essentially the use of currency (foreign money) in the settlement of international trade between countries. Trading in foreign exchange (Forex) establishes values for commodities or goods manufactured that enter the export-import arena. Forex permits conversion of money. For example, U.S. business can import European goods and still pay Euros, though the business income is in U.S. dollars. The typical foreign exchange transaction involves purchasing a quantity of one currency by paying desired quantity of another currency.
Ever since it started forming (1970), the foreign exchange market has been the largest financial market in the world with great liquidity. Unlike other financial markets, the Forex market does not possess any physical location or central exchange. It basically operates via global network of banks, corporations and individuals interested in trading one currency for another. This allows the Forex market to function on a 24 hour basis spanning all major financial centres.
Forex transactions are now carried out by Forex brokerage companies known as the major bank dealers. Unlike stock markets, the prices in the Forex market don’t fluctuate dramatically. The Forex exchange market is the largest financial market and the traders include large banks, central banks, corporations, governments, currency speculators and financial institutions. The average volume in global foreign exchange is growing enormously and the turnover has seen a rise too.
It is advisable to have a complete understanding of Forex and learn analysis of the data available on stock charts, before trading Forex online. Forex training might come handy since a perfect understanding of the market is required. Forex is an exchange of currencies and some of the major currencies involved in the trade are:
- US Dollar (USD)
- British Pound (GBP)
- Japanese Yen (JPY)
- Swiss Franc (CHF)
- European Union Euro (EUR)
- Australian Dollar (AUD)
- New Zealand Dollar (NZD)
- Canadian Dollar (CAD)