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forex is? Forex Trading for Beginners | What is forex?


Forex is an international financial market founded in 1976, where currency exchange is carried out. This name came from the English word “foreign exchange”. 

The Forex market is necessary for the normal functioning of the world economy and ensuring the exchange of capital between central banks of different countries, companies leading international business, or commercial banks.

The main convertible currencies are traded on Forex in relation to each other. The most popular pairs are Euro /US dollar, Japanese yen / US dollar, British pound / US dollar, and US dollar / Swiss franc.

National banks are intervening to stabilize the exchange rate of their currencies.

Importers and exporters come to Forex to exchange earnings for their national currency or, conversely, to buy foreign currency in order to make payments under contracts abroad.

Commercial banks have their own business in this segment, which consists of issuing currency quotes for buying and selling. The difference in the purchase and sale price is called the quote spread, which makes up their income.

Speculators use Forex as a reliable income source for those who know how to play on the difference in exchange rates, extracting considerable profit. And for this,

 you do not need to have a master's degree in economics at all.

forex is? Forex Trading for Beginners | How to Make Money Online?

“Forex” is...

Many people call “Forex” an exchange, but this is not entirely true. Unlike stock exchanges, Forex works around the clock, because world banks are in different time zones. In addition, Forex is not tied to any particular place, it is a virtual market, and you can play on it from

anywhere in the world: from Moscow, New York or the beach in Bali. The main thing is that you have access to the Internet and access to the market provided by the intermediary, who is the guarantor of the transaction, which will be concluded on his behalf and at his expense. 

Such an intermediary for small and medium clients is a prime broker with whom a contract is terminated. It should be understood that a small trader cannot directly access the "same Forex” simply due to a lack of funds, because the standard lot size in the Forex market is 5 million US dollars.

The exchange rate changes every minute. For example, if you buy a euro for $1.2, and the next day it rises in price to $1.3, you can sell it and make a profit of $0.1.

Moreover, you can "win" both on the increase and on a decrease in the exchange rate, that is either buy cheaper and sell more expensive, or sell the currency at a higher price and repurchase it when the price drops (the latter method is hazardous, has many restrictions and conditions, and therefore it is strongly not recommended for beginner traders).

Various factors influence currency exchange rates: economic indicators, policies of national banks, political changes, and force majeure (for example, natural disasters, accidents at large enterprises, terrorist attacks and even weather conditions), as well as rumors, moods and expectations of market participants. 

However, despite all this, Forex is relatively stable, because the fall of one currency always entails a change in the exchange rate of another. An experienced trader can take advantage of this with considerable benefit for his wallet.

Understanding Currency Pairs.

What is a foreign exchange pair? A currency pair is a quotation of two different currencies, while the value of one currency is quoted in relation to the other. The first specified currency of the currency pair is called the base currency, and the second currency is the quote currency.

Currency pairs compare the value of one currency with another – the base currency (or the first) with the second currency or the quote currency. It indicates how much quote currency is needed to buy one unit of the base currency. 

Currencies are identified by an ISO currency code or a three-letter code with which they are associated in the international market. So, for the US dollar, the ISO code will be USD.

Key findings

A currency pair is a quote of the exchange rate of two different currencies traded in the Forex markets.

When an order is placed on a currency pair, the first specified currency or base currency is bought, and the second specified currency in the currency pair or quote currency is sold.

The EUR/USD currency pair is considered the most liquid currency pair globally, and USD/JPY is the second most popular currency pair globally.

Understanding Currency Pairs

Currency pairs are traded on the foreign exchange market, also known as the forex market. It is the largest and most liquid market in the financial world. This market allows you to buy, sell, exchange and speculate in currencies, and it also enables currency conversion for international trade and investment. 

The forex market is open 24 hours a day, five days a week (including most holidays), and there is a huge trading volume.

All Forex transactions involve the simultaneous purchase of one currency and the sale of another. Still, the currency pair itself can be considered as a single unit, an instrument that is bought or sold. 

When you buy a currency pair from a forex broker, you buy the base currency and sell the quote currency. Conversely, when you sell a currency pair, you sell the base currency and get the quote currency.

Currency pairs are quoted based on their purchase (purchase) and demand (sale) prices. The offer price is when a forex broker will buy a base currency from you in exchange for a quote or a counter currency, and it is the price at which the broker will sell you the base currency in exchange for a quote or a counter currency. And it is also called an offer.

While trading currencies, you sell one currency to buy another. Conversely, when trading commodities or stocks, you use cash to buy a unit of that commodity or some shares of a particular stock. 

Economic data related to currency pairs, such as interest rates and economic growth or gross domestic product (GDP), affect the prices of the trading pair.

What currency pairs are most traded in the forex market?

There are many official currencies that are used all over the world but only in Forex. Only the most economically/politically stable and liquid currencies are required when trading currency in sufficient quantities. For example, because of the size and power of the United States economy, the US dollar is the most actively traded currency in the world.

Key findings

  • Forex markets are used to trade exchange rates between two or more national currencies.
  • All forex trading, whether it is selling, buying or trading, will take place through currency pairs.
  • The most common currency pairs often include the US dollar or euro but also occur among geographical neighbours such as Australia and New Zealand.

What are currency pairs?

Currency pairs are national currencies from two countries combined for trading on the foreign exchange (FX) market. Both currencies will have exchange rates at which the transaction will be based on the position. All forex trading, whether it is selling, buying or trading, will take place through currency pairs.

Overall, the eight most traded currencies (in no particular order): US Dollar (USD), Canadian Dollar (CAD), Euro (EUR), British Pound (GBP), Swiss Franc (CHF), New Zealand Dollar (NZD), Australian Dollar (AUD) and Japanese Yen (JPY).

The currency of almost any country can trade, but some currencies combine more often than other money. All major currency pairs contain the US dollar, and there are many major currency pairs in the forex market around the world. For example, some of the most common currency pairs :

USD / JPY. This currency pair sets the US dollar against the Japanese yen.

US Dollar / Pound Sterling. This currency pair sets the US dollar against the pound of the United Kingdom and is commonly referred to as the pound-dollar.

USD / CHF. This currency pair sets the US dollar against the Swiss currency, called the Swiss dollar.

USD / CAD. This currency pair sets the US dollar against the Canadian dollar, called a dollar loonie.

AUD / USD. This currency pair sets the US dollar against the Australian dollar and is called the Australian dollar.

NZD / USD. This currency pair sets the currency of New Zealand against the US dollar, and it is called the kiwi dollar.

There are also currency pairs that are not traded against the US dollar, which are called cross currency pairs. Common cross currency pairs include the euro and the Japanese yen.

Currency pairs most frequently traded on the Forex market by volume

Currencies should be traded in pairs. Mathematically, there are 27 different currency pairs that can be obtained from only eight currencies. However, there are about 18 currency pairs that are usually quoted by forex market makers as a result of their overall liquidity.

The total volume of currency trading with the participation of these 18 pairs accounts for most of the trading volume on the foreign exchange market. This manageable number of options makes trading less difficult than stock trading, with thousands of possible choices.

Major currency pairs

A widely traded currency pair is EUR/USD. In fact, it is the most liquid currency pair in the world because it is the most actively traded. The quote EUR / USD = 1.2500 means that one euro is exchanged for 1.2500 US dollars. In this case, the euro is the base currency, and the US dollar is the quote currency (counter currency). 

This means that 1 euro can be exchanged for 1.25 US dollars. On the other hand, buying 100 euros will cost you $125.

There are as many currency pairs as there are currencies in the world, and the total number of existing currency pairs changes as currencies come and go. All currency pairs are classified according to the volume traded daily for the pair.

The currencies that are traded with the highest trading volume relative to the US dollar are called major currencies, which include:

  • EUR /USD or Euro against the dollar.
  • USD / JPY or dollar against the Japanese Yen.
  • GBP/USD or the British pound against the dollar.
  • USD/CHF or Swiss Franc against the dollar.
  • AUD/USD or Australian Dollar against.
  • USD/CAD or Canadian Dollar against US Dollar.
The last two currency pairs are known as commodity currencies because both Canada and Australia are rich in commodities, and their prices affect both countries. 

The main currency pairs, as a rule, have the most liquid markets and are traded 24 hours a day from Monday to Thursday. Currency markets open on Sunday evening and close on Friday at 17:00 US Eastern time.