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Forex Trading Explained

Forex trading enables you to speculate and potentially profit from the future direction of currencies by buying or selling the exchange rate of one currency against another.

Forex – also referred to as foreign exchange and FX – is the world’s largest market with an average turnover in excess of US$4 trillion per day. Currency values rise (appreciate) and fall (depreciate) against each other due to a number of factors, including international trade or investment flows, to economic or political conditions. This is what makes trading forex so interesting and exciting – high market liquidity means that prices can change rapidly in response to news and short-term events, creating multiple trading opportunities for retail forex traders.

Some of the key factors that influence forex prices are:

Political and economic stability

Monetary Policy

Currency intervention

Natural disasters (earthquakes, tsunamis, etc.)

The common goal of forex traders is to profit from these changes in the value of one currency against another by actively speculating on which way forex prices are likely to turn in the future.

Unlike most financial markets, the over-the-counter (OTC) forex market has no physical location or central exchange and trades 24 hours a day through a global network of businesses, banks and individuals.

This means that currency prices are constantly fluctuating in value against each other, offering multiple trading opportunities.