What is FX/Forex

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What is FX/Forex

What is FX/Forex

FX or Forex is where one currency is traded against a value of another currency. Trading currency is the world biggest and most popular way to trade.

Here are the following reasons to FX/Forex’s popularity:
 
24 Hour trading
 
The FX/Forex market is open 24 hours. This allows traders to react to news has it happens. For example if there is political news in Europe that affects the value of the euro, the inhabitants of other continents are able to act allowing profit or preventing losses. This is providing they are awake at that time.
 
The major trading hubs for FX/Forex include
 
  • Frankfurt
  • London
  • New York
  • Tokyo
  • Sydney
 
 
Liquidity
 
The FX/Forex market has the highest liquidity in the world. Because there is an extremely high volume of buyers and sellers, this makes it easy for buyers and sellers, which allows narrow spreads.
 
 
Leverage – Trading on Margin
 
This means that a trader can use more capital than they have in their account. This allows traders to make a higher margin on much smaller trades. Although this is a great way to make a lot of money quickly it is also likely to exceed the amount of capital you have when making a loss. The trader should be educated in the Fx/Forex market before engaging in such a trade.
 
Tighter Spreads – No Commissions
 
 The Majority of FX/Forex brokers do not charge commission. However there is a spread. The dealing spread is the difference between the bid and the ask quote. The bid is the price the buyer is willing to pay. The ask quote is what the seller is willing to sell. 5 pips is the average spread.
 
Capitalise on rising or falling markets
 
 A currency can be traded in pairs. For example the pound vs. euro; if you think the pound will weaken and the euro will strengthen you can make the appropriate trade to capitalize on this rise and fall.
 
What are the different types of FX/Forex markets?
 
Spot Markets:
 
  • This is where simply one currency is being traded for another.
 
Forwards and Futures:
 
  • This type of trading is a derivative of spot market trading. However instead of one currency vs. another this type of market is based on contracts that represent claims on different currencies and prices.
 
 
 
 
 
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