What Is Foreign Exchange (Forex

What Is Foreign Exchange (Forex

By Charles Joseph | Editor, Financial Affairs
Reviewed by Corey Michael | Senior Financial Analyst

Foreign Exchange, commonly known as Forex, refers to the global marketplace for trading national currencies against each other. Due to factors such as interest rates, tourism, trade, geopolitics and more, currencies constantly fluctuate in value relative to each other. Forex trading involves the simultaneous buying of one currency and selling of another, primarily for the goal of speculating on these frequent price changes to make a profit.

The Forex market is decentralized and operates without a central exchange. Instead, currency trading is electronically over-the-counter (OTC), which signifies that all trades happen via computer networks between traders around the world, rather than on one centralized exchange. The Forex market is open 24 hours a day, five days a week, and currencies are traded globally in the major financial centres of London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris and Sydney.

Related Questions

1. How does Forex trading work?

Forex trading involves buying and selling currency pairs, which are two nation’s currencies against each other. Traders speculate on these pairs’ future direction and make profit from the differences in exchange rates.

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2. What are the major currency pairs in Forex?

The major currency pairs in the Forex market include USD/EUR (US dollar vs Euro), USD/JPY (US dollar vs Japanese yen), GBP/USD (British pound vs US dollar), and USD/CHF (US dollar vs Swiss franc).

3. What factors influence the Forex market?

Various factors like economic data, geopolitical events, changes in interest rates, and market sentiment can influence the Forex market.

4. Is Forex trading risky?

Like any form of trading, Forex trading involves risk. The value of currencies can be very volatile, and small changes can lead to substantial losses or gains.

5. How can one get started with Forex trading?

Interested individuals can get started with Forex trading by learning about the market, crafting a trading plan, testing strategies via a demo account, choosing a reliable forex broker, and starting to trade carefully with real money.