Beginner
What Is Forex
Forex is a shortened term for the foreign exchange market. It can also be known as “FX”. It is a global financial market used for exchanging currencies. It runs 24 hours a day for 5 days out of the week. The foreign exchange market is the largest financial market in the world and is 5 times larger than the stock market.
How Does Forex Work
the foreign exchange market works through the process of exchanging one currency for another. The exchange rate between the two fluctuates everyday. As a trader, you speculate if the exchange rate will increase or decrease and make or lose money based off of your analysis. A great way to grasp this concept is to imagine you are traveling to another part of the world. When you visit another country, you will most likely have to exchange your currency into the country’s currency that you are in. For this example, let’s say you are trying to convert your united states dollars into euros. The moment you decide to do so, there will be an exchange rate. The exchange rate may be 1.00. This means one United States Dollar will be equal to one Euro. You decided to convert 1,000 united States Dollars to get 1,000 Euros. In this scenario, let’s say you do not want to spend any of your euros. You want your Euros converted back into United States Dollars to head back home. When you do this, the exchange rate has changed. It could be less or greater than 1.00. If the exchange rate is less than 1.0o, then you would actually get more than 1,000 United States Dollars back. IF the exchange rate is more than 1.00, then you would get less than 1,000 United States dollars back. The only thing you did was convert your currency but you could potentially still profit from it. The only difference nowadays is that we can all do this electronically over the internet without having to physically exchange our money.
