What is Foreign Exchange?
Foreign Exchange, commonly known as FX or Forex, is the platform where one nation's currency is exchanged for another. With 2-3 trillion dollars being traded by traders and brokers all over the world foreign exchange is a huge platform of opportunities for making money.
Foreign exchange is also known as FX or Forex and is a 24/7 exchange market with no land based or centralized office or zone for trading. Forex exchange is unlike any stock or exchange market that trades freshly on day to day bases and has a central office where complete dealing is done. Also, Forex has no bull and bear dominance making the whole currency buying and selling a comfortable process.
In Forex the trading is done with currency pairs and these currency pairs are present in two group ‘Majors’ and ‘Minors’. In these pairs where the first currency acts as a commodity the second currency is the actual money. The profit in trading Forex pairs comes when you buy one pair and sell a currency against another, thus the key to profit lies in purchasing low rate currency and selling it against the high rate or well doing currency.
Some of the four famous ‘Major’ pairs are:
- Euro and USD (EUR/USD),
- Japanese Yen (USD/JPY), USD
- British Pound and USD (GBP/USD)
- Swiss Frank (USD/CHF)
The basic towards earning profit in trading pairs can be easily explained by the following example. If you decide to trade with a EUR/USD pair and buy a Euro against US dollar then if the value of your euro is equal twice of a US dollar you can always sell your Euro and earn a profitable amount of what you invested.
To find out when and how to buy and sell a currency you need to have a good knowledge of Forex trend, market situation and fundamental as well as technical analyses of the foreign exchange trading.
With brokers and trader dealing involved on large basis it is important for a trader to choose the right broker for a successful trading in FX market. If you have found a good broker who has the art of turning your trade to a profitable side trading in foreign exchange can be a good experience. Thus, a good search for a broker also plays a big role in earning revenues and money in foreign exchange.
This Interbank/Interdealer market can be managed successful if you have a complete knowledge and idea about what you are in to. When deciding to start with trading in foreign exchange try to educate yourself with all the basics of trading, important Forex terms, ways to use charts, utilization of stop loss at the right time and everything about analyses and research in various forms of trading such as day trading.
No doubt foreign exchange is a not a game and needs expertise to make it to a successful level, but with right guidance, good broker and careful usage of various tools (demo account, stop loss and etc) you can always learn and move on to making it big in the world’ largest economic market.