Published On: Sun, Dec 17th, 2017

A brief introduction to the enigma of Forex trading

Trading is one recreation and way of income that almost everyone seems to love. But rather than dealing in stocks people are looking into different forms of trading. This widens their path of trading and they can easily make more profit. One of the most famous ways of trading is Forex trading which has gained quite a bit of popularity throughout the years. So, we shall know a bit about the system and the ways to trade Forex.

What is Forex trading?

As we can guess Forex stands for Foreign Exchange or the various currencies that are utilised throughout the world. So rather than stocks in this form of trading, currencies are traded in their place. Foreign exchange does take place in day to day life through the exchange of currencies due to trading and travelling of goods and people. The forex market is the largest liquid financial market in the world. It can be estimated that US $2000 billion are traded on a daily basis.

The forex exchange is famous due to it being a decentralised market. The market operates on a 24 hour basis as there are several countries throughout the world and trade in currencies are taking place. Some of the famous places of trading are London, Hong Kong, Zurich, and Paris. Three ways are used in dealing with Forex. They are:

  • Through a spot market where the Forex is based on the current price of the currencies. For example the AUD/USD exchanges the current rates of the Australian and US dollars will be used at the given moment. These markets are the most famous one’s these days. All the transactions are based on the present and bilateral transaction between the buyer and the seller takes place.
  • The other one’s used in Forex trading is the forward and the future markets. These are based on the events that will take place in the future. Contracts are bought based on the terms of the parties and they are remitted when the contracts expire. They can even be exchanged or bought before the actual date of expiry. This type of markets is liked by big corporations and speculators.

This is a very brief introduction to the Forex market. The forex market holds a big significance in today’s world and it almost states the currencies and their values. So, if someone is likely to trade in forex they must be aware of the current circumstances of the world.

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