What is Forex/FX?
Forex / (ˈfɒrɛks) / noun [ C usually singular ]
1. The buying and selling of currencies.
Do you know that Forex is one of the largest markets in the world with over $5 trillion traded every day, while the world’s stock markets combined average is only about $85 billion per day!
The foreign exchange market is an over the counter market (OTC). Over the counter, trading refers to trading directly between two parties, without the supervision of an exchange. This guarantees the instant, convenient and fast features of foreign exchange trading. The forex market is open 24 hours, 5 days a week – Monday to Friday. Trading begins with the opening of the market in Australia, Asia, Europe to follow and then the USA until the markets close.
Forex trading is when you buy one currency and sell another. Let us take the AUD/USD as an example: If the Australian dollar
appreciates, then the buying power of the Australian dollar will increase, which means that traders can now buy more dollars with what they have started off with, so therefore, profiting from it.
There are hundreds of currency pairs in the world, each currency has a three-letter symbol. For example, Australian dollars are AUS, Euros are EUR, British Pounds are GBP, American dollars are USD and onwards to all the currencies.
There are three types of forex pairs; major pairs, minor pairs and exotic pairs. The major pair always involves the USD and is the most traded currency, the following are the major pairs traded: AUD/USD, NZD/USD, EUR/USD, USD/JPY, GBP/USD, USD/CAD and USD/CHF.
The minor pairs are the major currencies traded between each other which excludes the USD. For example, NZD/CHF, AUD/SGD, EUR/GBP, CHFJPY and others.
The exotic pairs have one major currency and one minor. For example, USD/NOK, EUR/ZAR, GBP/SEK and others.
Things have changed over the years
Forex trading was once for companies and customers with large sums of money. However, in recent years, with the development of the Internet and the transparency of global information, any type of trader can access market analysis reports and conduct foreign exchange trading over the Internet.
You can now make trading and investment decisions to buy and sell Euros or dollars at any time, day or night (Sunday through Friday).
What is a contract for difference (CFD)?
CFDs are a form of derivative trading, it allows you to speculate on the price fluctuations of fast-moving global financial markets such as shares, indices, commodities, currencies and treasuries.
When you trade CFDs, you don’t buy or sell the underlying asset. Instead, you buy units of an instrument that reflects the value of these assets.
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