Foreign exchange market is where currencies get traded or exchanged for an agreed price on the over-the-counter (OTC) market. Other names for foreign exchange include currency trading, Forex, or FX. It is by far the world’s biggest and most liquid financial market.
The Forex trading market, unlike most financial markets, is not centralised. There is no physical location or central marketplace for exchange. In fact, all transactions are done electronically over-the-counter (OTC), which means currency trading occur via computer networks for all traders in the world.
The Forex Market Doesn’t Sleep
Another key aspect that makes Forex so popular is it’s open 24 hours for five and a half days a week. Currencies are traded in major financial centres worldwide across different timezones, so when the trading day ends in the U.S., different Forex market trading platforms open in Singapore.
How Does it Work?
Forex trading is simply buying and selling currencies. If you’ve travelled abroad, then you have made a Forex transaction yourself. For example, if you’re from the U.S. and you travel to Europe, you would need to have your U.S. dollars exchange to Euros. The exchange rate between two different currencies determines how many Euros you get for your dollars.
If you’re always travelling out of the country, you would notice that the exchange rate continuously fluctuates. This is due to many factors that include, but not limited to, economics and geopolitics. Forex traders actively speculate which way Forex prices will go with the primary goal of making a profit from these changes.
You will find that most Forex brokers offer demo accounts or mini accounts before funding a full account. Make use of this opportunity to try out each broker’s software during the trial period to help you decide which platform suits you best.