Forex trading is the simultaneous buying of one currency and selling another.
When you trade in the forex market, you buy or sell in currency pairs.
As the value of one currency rises or falls relative to another, traders decide to buy or sell currencies to make profits.
Retail forex traders participate in the forex market as speculators who are hoping to profit from fluctuations in currency rates.
Each currency in the pair is listed as a three-letter code.
The first two letters stand for the country (or region), and the third letter standing for the currency itself.
For example, USD stands for the US dollar and CAD for the Canadian dollar
In the USD/CAD pair, you are buying the U.S. dollar by selling the Canadian dollar.
How to read a currency quote
The first currency listed in a forex pair is called the base currency, and the second currency is called the quote currency (also known as the “counter currency“).
The price of a forex pair is how much one unit of the base currency is worth in the quote currency.
For example, for the currency “EUR/USD”, EUR is the base currency and USD is the quote currency.
If EUR/USD is trading at 1.1080, then one euro is worth 1.1080 U.S. dollars
If the euro rises against the dollar, then a single euro will be worth more dollars and the pair’s price will increase. If it drops, the pair’s price will decrease.
If you think that the base currency in a pair is likely to strengthen against the quote currency, you can buy the pair (“go long”).
If you think it will weaken, you can sell the pair (“go short”).
What is Forex?
Foreign exchange (also known as forex or FX) refers to the global, over-the-counter market (OTC) where traders, investors, institutions, and banks, buy and sell currencies.
Trading is conducted over the “interbank market”, an online channel through which currencies are traded 24 hours a day, five days a week.
With a global daily volume of more than $5 trillion, forex is the largest financial market.
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