Forex, otherwise known as foreign exchange, currency trading or FX is a global market that is decentralized for the purpose of trading different currencies around the world.
Over the years, Forex market have remained the largest and most liquid market in the world, with a daily trading volume that is averaging 5 trillion dollars. The volume of trade that happens in this market offers different packages to different people, depending entirely on what you are looking to achieve. It could be an exciting trading opportunity that is not available with other investment platforms or an amazing market to store the value of your currency.
How the foreign exchange market works
The trading activities of the foreign exchange market works in a similar way with the stock exchange market where equity are traded based on your projection of what the market will look like in the future. However, the big difference is that in Forex, you can trade up and down and at anytime you want to.
This simply signifies that if you think a currency has potential to increase in value within a short period of time, you can purchase it and still sell it off when there is a tendency of a decrease in its value.
With a market that is this large, it is very easy to find buyers at any time that you wish to sell currencies and to find sellers at any time that you wish to buy.
Here is a short practical illustration of this
When you hear for instance that the government of Japan is about enacting a policy that will drop the value of their currency, you could sell off the Japanese currency against other currencies. You could also buy their currency when there is speculation of a rise.
With a lot of tutorials and free guides available online, trading forex has gotten fairly easier than it used to be. Before starting a career in the market, it is important that you acquaint yourself with the market and with some of the terminologies that you may come across during trade.
Here’s a brief explanation of some important terms used in the market.
Base currency: This is the first currency that will be quoted in a currency pair. It is otherwise known as the domestic currency.
Currency pair: this is a process where a currency’s value is determined by comparing it to another currency in the market.
Quote currency: Also known as a secondary currency or a foreign currency, it is the second currency that is quoted in a currency pair.
Cross currency pair: This is a kind of currency pair that does not involve the USD. That is, currencies are converted to another currency without first been changed to USD.