What is Forex Trading
In simple terms, Forex Trading is the exchanging of one currency for the other. Currencies are bought and sold against other currencies all the time.Forex market is an Over the Counter 24 hours market. The price of a currency is determined by how one particular currency is in demand against another currency.
There are lots of currencies that get traded on the Forex market but there are mainly seven currency pairs that are regularly and largely traded. They constitute 75% of the entire Forex market. Here are the seven pairs:
- EUR/USD i.e., The Euro and US dollar
- USD/JPY i.e. The US dollar and Japanese Yen:
- The British pound sterling and US dollar: GBP/USD
- The US dollar and Swiss Franc: USD/CHF
- The Australian dollar and US dollar: AUD/USD
- The US dollar and Canadian dollar: USD/CAD
- The New Zealand dollar and US dollar: NZD/USD
A sub-segment of the currency trading market is speculation, also known as Forex trading. A fraction of that is from Retail traders.
A trader may buy or sell a currency to make a profit if he/she believes that the price of that currency will change. Normally this decision is based on technical analysis, day-to-day news as well as market sentiment.
For example, if a trader believes that the price of the British Pound would go up against Euro due to Brexit. He can buy GBP/EUR if he believes the price would go up.
