All About Forex

Introduction to Forex Trading

As the name goes Forex trading refers to trading in foreign exchange where you buy and sell foreign currencies in wholesale quantities. It is a market that is bigger in size than stock and shares.

Because of the time differences between countries, Forex transaction is 24 hours a day event, except on weekends. And there are people in different part of the world that make money from trading in Forex.

The market for currencies is extremely liquid, thus you are able to buy and sell on demand and make money from the difference between the buying and selling price of a currencies pair. The difference between the buying and the selling price is known as the “spread” – the smaller the transaction size the bigger the spread.

Currencies on the Forex market are traded against each other and each market is separate. The market for the currencies pair like Dollar against Euro is separate from the market for the Yen against Pound. But the market for Dollar against Pound will reflect what is happening in the other markets that the 2 currencies are operating in.

These may sound complicated but the basic is that prices are a reflection of supply and demand for individual currencies. If a currency is in short supply but high demand then the price for that currency will go up. And if investors lose faith in a currency then the price of that currency will go down.

Exchange rates are influenced by a mixture of the flow of money, interest rates and inflation expectations.

Economic factors and political conditions of a country will also influence the price at which a currency is traded. Future expectations also play a part, e.g. if it is expected that a country will implement an interest rate change this is likely to have an impact to the currency price.

Tags: Forex Trading, Introduction