Unlike the stocks and commodities market forex is a entirely decentralized make known which means that there is no central location and there are no formal exchanges where transactions consent place. practically all forex trading is finished over-the-counter electronically by telephone, internet or in person.
Forex is a general term combining all worldwide financial institutions and organizations of all sizes into a single make known place.
Investors profit by correctly forecasting far ahead values of currencies. E.g. if you think that the U.S. dollar is going to accumulation in value adjacent to the Canadian dollar you can buy the USDCAD currency pair. If you are right and the value of the U.S. dollar increases you can sell the pair for a well along price.
Your profit is the difference between the buy price and the sale price multiplied by the number of lots traded - trade size - or vice versa if you sell the pair short.
What is Forex?
Forex is the acronym for "currency market", moreover known as the Portuguese currency market. The currency is the financial reveal considering the largest dimension and the highest liquidity in the world, taking into consideration more than 4 billion dollars a morning in trailer movements. The size of the foreign dispute spread around is such that the trading volume of the supplementary York stock exchange does not even accomplish 2% of those realized in the currency.
Currency pairs and row rate
In forex trading considering currency pairs (cryptomoedas and more). By analyzing the EUR / USD clash rate, you can see how many USD (listed or supplementary currency) you dependence to purchase 1 EUR (base currency).
Therefore, if the clash rate of the EUR / USD currency pair is 1.2356, this means that each euro can purchase 1.2356 dollars.
If the squabble rate increases, it means that the base currency has strengthened against the auxiliary currency. If the argument rate eventually decreases, it means the opposite.
The characteristics of the Forex or Forex market
- Liquidity: Because of the $ 5 billion that circulates daily, the foreign squabble spread around is considered the most liquid present in the world. Basically, this means that you can buy any currency whenever you want, as long as the broadcast is open.
- operating and decentralized: the foreign difference of opinion promote is a enthusiastic and decentralized market, meaning that any trader can invest anywhere in the world and, consequently, influence the price trend of a pair.
- 24/5 hours: A key factor that characterizes trading on the foreign disagreement publicize is the number of hours of operation; The foreign quarrel promote is approach 24 hours a day, five in force days a week, which makes it definitely attractive for many traders.
What are the factors that decree the foreign disagreement market?
As currency transactions are immediate, the price of foreign quarrel is affected by the put it on of supply and demand and, consequently, by speculation.
Thus, stability and the embassy and economic events, as capably as the monetary policy of the countries, are elements that describe the contributions.
- Shares of private and public economic agents. Financial institutions, governments and central banks in each country can directly feign the price of a currency by adopting positive economic events and announcements. For example, a rise in assimilation rates in the US Federal reserve would accumulation the value of the US currency.
- Political, social and economic events. If Forex participants undertake that a social event, can pretend to have the political, economic or natural strengthening or fade away in a currency, they will regulate the make known price in the same way as its operations that meet the expense of amend and demand for the currency concerned.
The more people bow to that a consistent trend is followed, the more it will work spread around prices, as this will reflect broadcast sentiment.
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