What is Forex?

Forex is the foreign exchange market. A market where one currency is exchanged for another. It is one of the largest markets in the world, with a daily turnover of $4 trillion. A large part of the market is made up of currency traders who speculate on movements in exchange rates. Exchange rate fluctautions are caused by actual monetary flows as well as anticipated macroeconomic conditions. Currencies are always traded in pairs. For example the euro can be traded against the dollar, this pair is denoted as  EUR/USD. In this instance the euro is referred to as the base currency and the dollar as the counter currency.

 

 

Here we are buying or selling the euro and using the dollar as the means of trade. For example; the euro might be bid at 1.1914 and offered at 1.1917, a difference of 3 pips.A pip is the smallest price increment in forex trading and stands for (percentage in point). Instead, the difference of 3 pips between the “buy” and the “sell” is called spread and this is the fee each broker applies per trade. As prices vary only slightly forex traders increase their opportunities of making profits (or losing money) by using leverages. For example, if you have 100 dollars and a leverage of 10X you can buy 1000 dollars worth of units and each variation in price will be 10 times higher on the final outcome of the trade. The foreign exchange market is open 24 hours a day and consists  4 main sessions, these are London, New york, Tokyo and Sydney. When one session closes another one opens, so it never actually stops!

The best way to learn more is actually to open a free demo account and play with virtual money. For beginners I recommend using eToro as it is a very intuitive platform and easy to use.

Register a free demo account

Moreover, eToro offers many tools to be profitable in trading. In fact, they introduced the concept of social trading, click here to find out more

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