Forex Trading: What it is & How it works

pexels-photo-159888.jpgForex stands for the foreign exchange market and is where currencies are traded. The reason why exchanging currencies is vital is because it is needed to carry out foreign business. The forex market is the largest and most liquid market. In a liquid market, trades are performed rapidly, there are many bid offers and ask offers, as well as low volatility (small fluctuations and lower trading risks).

Forex trading affects us all: If you’d like to take a trip to Germany, you’ll need to exchange your dollars for euros. The current forex exchange rate will then determine how many euros you’ll receive for your dollars. Changes in this rate can affect large companies tremendously, even if it’s a difference of just a few pennies. When doing foreign or paying workers in your factory in a different country, a few pennies can turn into a lot of money. This can either be very harmful or very beneficial.

Trading takes place electronically between forex traders around the world, 24 hours a day, 5 1/2 days a week. When trading in the forex market you can sell or buy a currency, depending on if you think it will decrease or increase. Finding a buyer is much easier than in stock trading because of the markets huge size.

All in all, forex trading seems to be a term not understood by many even though it is extremely important. Feel free to request a Part Two to this article to learn more!

Links I used/ Further Information:

Investopedia

FXCM

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