- Forex Trading For Beginners – What is Forex?
- Forex Trading For Beginners – Basic Terms
What is Forex?
For example, John travels from the United States to Germany. The currency used in the United States is the US Dollar while the one used in Germany is the Euro
John would have to exchange US Dollars for Euros in order to buy stuff in Germany. The exchange or trading of one currency for another is called Forex.
The forex market is the most liquid market in the World. It is estimated that about 5 trillion US Dollars is exchanged every day.
Currencies are traded in pairs. For example, EURUSD, USDCAD, GBPUSD and so many more.
EURUSD currently has a value of 1.1705, this means One Euro is equal to 1.1705 US Dollars.
How do forex traders make money? They do so by betting one currency will strengthen against the other. For example, a trader can make money by betting that the Euro will decrease in value vs the USD by selling the Euro. If indeed the value falls the trader makes a profit. If however, it increases the trader loses.
The forex market can be traded 24 hours a day, 5 days a week from Monday to Friday.
The market is decentralized and starts trading from the Australian/Asian session to the UK/European session to the New York ( North American ) session.
In the next couple of lessons, we will look at some basic terms that apply to Forex. Stay tuned.