Here is a simple way to explain What Forex Trading is and How it Works
Forex trading is the simultaneous buying of one currency and selling of another
These two currencies make up what is known as a “currency pair”
Currencies are always traded in pairs – each currency is represented by three letters
The first two letters represent the country and the third letter identifies the currency
Forex pairs are read in the opposite direction of mathematical proportions or ratios
EUR/USD = 1.23700
The currency to the left of the slash (“/”) is called the base currency (in this example, the Euro) and the currency on the right is called the quote currency (in this example, the U.S Dollar)
This notation means that 1 unit of the base currency (that is, 1 Euro) is equal to 1.23700 U.S Dollars
You have to pay 1.23700 U.S Dollars to buy 1 Euro
If selling, the foreign currency exchange rate specifies how much units of the quote currency you get for selling one unit of the base currency
In the above example, you will receive 1.23700 U.S Dollars when you sell 1 Euro
When to Buy?
A trader would open a buy position if they believe that the value of that specific base currency would increase.
When to Sell?
A trader would open a sell position if they believe that the value of that specific base currency would decrease.
When can Currencies be Traded?
The spot FX market is unique among the world financial markets in that it’s open 24 hours a day, 5 days a week.
For you to start forex trading, you need to get yourself trained because matters that involves money can be too risky if tackled without prior knowledge
See related posts and learn more about forex trading
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