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What is Forex and the Different Ways to Trade Forex ?

What is Forex and the Different Ways to Trade Forex ?

what is forex and how does it workLearn about what is forex? A marketplace where anyone can trade in stocks and currencies. It is an area which accepts all kind of currencies around the world. It is the one which is most popular and holds the highest liquidity! When all these statements combine together, they form the Forex Market Place. In other words, it is a globally accepted currency conversion. It is also a trading market which agrees with all kind of currencies. Forex allows one to exchange them on referable rates. However, this is a humongous size market place in terms of cash liquidity and transactions. Forex aka FX does not have a physical center. All of its transactions are available through electronic medium and because of this easy, anyone can trade on it from anywhere around the globe.

Looking for a more detailed and simple explanation, imagine you are traveling to Australia from India, the first thing which you will do after landing at Australia Airport is to exchange your INR currency with Australian Dollar. Most of the times, you will find a currency conversion booth. It will do the needful by charging the currency conversion rate. These rates keep changing as per the market stats, and yes, that’s how you use Forex market place. Traders generally invest their cash in a high currency and once rates of conversion changes to their profit, they withdraw the money in any form of currency. This highly popular market place trades around 5 trillion USD per day, and that is the highest one around the planet.


What Is Traded In Forex Trade?

What Is Traded In Forex Trade?The short and crisp answer to the question, ‘What is traded in Forex Trade?’ is ‘Money.’ Forex or FX is the biggest currency exchange market place. It runs on an electronic medium and converts one currency into any other one. It is the mathematics of buying a country’s currency. However, it is doing well in terms of economy, and by using the amount as a stock on the country face value, one can get profitable returns. It is imperative to understand the concept. When a person buys a few dollars in exchange for Yen (Japanese Currency), he is actually investing in the United States economy. It depends on the current statistics and his knowledge that the US is doing good. The conversion value will earn him profit after a particular time.


Forex Trade is a worldwide popular marketplace where people invest in other country’s currency as they buy to keep them and sell. They repeat the process once their price value increases again, Buying INR (Indian National Rupee) in exchange of USD (United States Dollar) and then waiting (using the converted amount as stock). Once the value of USD increases, the sale of the kept amount will provide the principal + profit amount to the seller. One of the highest traded currency over Forex is USD. Euro, Pound, and Yen also follow the pathway. Forex allows everyone to invest and exchange their money and generally transact through online booths. People often get confused in this as it takes some time to understand that one is investing in money to earn more of it.


Buying And Selling Currency Pairs-Forex

Buying And Selling Currency Pairs-ForexAs Forex is a currency exchange market place which deals in around trillions of dollars on a daily basis, one who wants to invest and trade at different Currency Pairs-Forex has to play with two kinds of currencies at a time. It is a simple thing to understand that FX trading is done with pairs of currencies only. As a person buys currency A by selling currency B, he invests in the first one by considering the running market trend and conversion rates. The most common way to trade on Forex is by taking the assistance of dealers and trade experts.


There are various slabs or say kinds of buying and selling currency pairs. These pairs are available among which the majority involves USD either in selling or buying. For example, a person performs a trade at various currency pairs-Forex by selling Euros and buying US dollars. In this case, the person is betting on the probability that the value of the Dollar will increase against Euros. When the conversion rate is most suitable for him, he’ll again sell the USD in exchange for Euros. Then he will make a profit. Various currency pairs such as ‘Exotic pairs,’ ‘Minor Pairs’ G10 currencies or BRIICS carries their specialty. Specific people with their interest can trade in them. Forex Market allows an individual to connect with Giant banking companies. Here, they can invest. However, the rate of conversion between currencies keeps fluctuating as per the market stats, making it a sort of tug of war between them.

Forex Market Size And Liquidity

Forex Market Size And LiquidityConsidered as one of the unique marketplaces where all kind of currencies gets traded. This market liquidates the cash flow of trillions of dollar daily, and yet does not has a physical location or an exchange center. All its  transactions happen virtually, and this currency market runs round the clock with a threaded network of private banks. It is the biggest global 


foreign exchange market which liquidates a considerable amount of money per day. Forex Market is solely running on electronic transactions and because it gives ease that anyone can trade on this platform with the help of the internet.

Unlike other foreign exchanges like the New York Stock Exchange, Forex Market is one that trades in all currencies. However, Dollar is the most preferred and transacted one which dominates around 80-85% of all transactions. AT Forex, traders can trade as per their will and current trading statistics. Other key attributes which a person checks before trading here is Attractive frequencies, ease of trading with all kind of currencies, reputation, and stability of a trading counterparty. The popularity of this fantastic platform can be known by the fact hundreds of thousands of people and organizations prefer to invest and trade at Forex. This Forex OTC market welcomes all kind of traders,and this makes it the trading market place with the highest liquidity. Forex runs majorly on the selling and buying characteristics of traders,and its currency trading is based on the speculation.

The Different Ways To Trade Forex

Now that you know what Forex is and what its advantages are, here is an insight into different ways to trade on this largest platform. Though the forex platform appears to be giant and complex, it’s trading ways are very simple. Some of the ways you can prefer to trade on Forex are-

Currency Futures – Currency Future is a contract which specifies the price at which one currency will be bought or sold for another currency on a future date. The information on transactions and prices is easily available as the currency future trading always occurs on a centralized exchange.

Currency Options – This method gives the buyer the right/option, without any obligation, to sell or buy a specific currency at a specified rate on or before a particular date. However, traders should keep in mind the fact that for certain options, the trading hours limit lowering their liquidity chances.

Currency ETFs – These are the latest additions to the ways of trading on FX. ETF stands for Exchange Traded Fund. Certain financial entities manage ETF. These financial entities buy and hold the currencies in a fund. Later, they offer their shares to the public.

Spot Forex Market – The most simple and popular way of trading in forex is through Spot Market where trading is done by exchanging currencies in real time. This is the cheapest way to step in this forex (FX) world as a trader can start trading with just 50 USD.  The icing on the cake is forex dealers and brokers offer free current trends, charts, and rates.

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