Before you start trading, you should know everything about the forex market. What is the forex market? A lot of people ask this question and there are a lot of confusing answers to that as well. For a beginner, it is essential to know in detail about the forex market and there should be no ambiguity about it.
To make it simple for you, we have compiled a very simple yet effective introduction to the forex market. In this introduction, you will learn about the forex market, how it functions, and how to trade in it. Without further ado, let’s start.
What is Forex Market?
Forex Market, also known as the Foreign Exchange market or FX, is a financial market where currencies are bought, sold, and exchanged with one another. This market is very different from the stock market because it has no centralized exchange. The transactions are performed over-the-counter through a wide network of banks, financial institutions, and brokers.
Forex market is open 24 hours a day and 5 days a week. There are three trading sessions: European, American, and Asian. The major financial centers can be found in almost every time zone; for example Tokyo, London, Zurich, Hong Kong, New York, Paris, Sydney, Singapore, and Frankfurt. It is very easy to distinguish between the three trading sessions based on the exchange activity taking place during a specific time.
The forex market has different parties involved including individuals, companies like hedge funds, central banks of the countries, investment banks around the world, commercial banks, and brokers. All of them are buying and selling currencies or putting their bets on other economies in huge volumes. This is what shapes up the forex market.
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How Forex Market Functions?
A forex market is different from conventional markets. You don’t have to travel to that specific country to purchase their currency but you can exchange them through the forex market. We should take the help of an example to make it easy to understand. Let’s suppose you have USDs and you want to convert them to Euros. What you are doing is when you are buying and selling one currency to another, you are putting your faith and your bid one country’s currency over the other. In this case, you are selling dollars to buy Euros. Simple as that!
What we can learn from this example is that currencies are traded in pairs. In the above example, it is Euro against the US Dollar. You can buy and sell the currencies and make money in between the fluctuations. The currencies are traded in huge volumes in the forex market and due to a large number of transactions, the values change rapidly. You can buy one currency when its rate is lower and against the other and sell it when its value increases.
We hope that you find this introduction of forex market useful and informative. In the next articles, we will discuss more topics that will help you further strengthen your knowledge of forex trading. Check out more Free & Premium Trading Indicators and boost your trading strategies with them.