Foreign exchange, more commonly known as “FX” or “Forex” is an exchange that occurs from a specific currency into another that occurs at an agreed price on an OTC (over-the-counter) market.
Forex is known as the world’s largest traded market an averages on turnovers of over $5.3 trillion each day.
What Is Forex Trading And What Features It Has
When explaining ‘what is forex’, it is necessary to say that it is a huge market, highly popular worldwide. And when looking at the features related to online trading, it becomes very simple to understand the popularity aspects.
Why Do People Trade Forex
A 24 Hour Market
Forex markets operate 24 hours every day, and are available at any time when traders hear about the latest in financial news.
Unlike stock markets, smaller markets that feature thousands of different stocks to select from, the markets related to Forex revolve around about eight of the major currencies. A narrowed down selection eliminates the room related to confusion. This means even though the marketplace is diverse and very large, there is a clear view of what goes on.
The large volume related to the daily trades causes forex to be known as the most “liquid” market worldwide, this translates to that under market conditions that are normal anyone can sell and buy currency as they please.
The Markets Cannot Be Cornered
The massive size of these markets also ensures that no person has the ability to corner this market. Even the banks don’t have enough power in controlling the markets for extended periods of time. This makes the forex markets an ideal place for little guys to make some money.
When learning about what is forex? it is important to learn about the basic terms that are used in CFD/Share and Forex trading
PIP is known as Percentage in Point and can also be referred to as “Point.” This is an amount that is equal to a minimum in price increase for a Forex trading rate. A common PIP will be 0.0001.
“Ask Price” is a price that a currency can be purchased at. This will also represent the price that the market will be prepared to sell currency to a potential trader.
“Bid price” is explained as price that currency can be sold at. This is the price the market is prepared to pay for a particular currency.
A “spread” is the difference between a ask price and a bid price.
This is known as the rate of a currency against another currency.
Global marketplaces have changed drastically in the last few years. Today newer investment approaches are important to minimize risks and to maintain higher portfolio returns. What is Forex? It’s among the most rewarding markets for traders. Low types of margin requirements and identifiable types of trading patterns offer rewarding opportunities in trading for many. When compared to worldwide stock markets, the foreign exchange aspect can be traded without constraints related to a centralized physical exchange.
Image courtesy of Flickr | Clarence Butt