Forex, Foreign Exchange trading is selling one currency in order to buy other with some agreed price between sellers and buyers. Most of this trading happens to gain profit. Forex pairs consist of base currency which is first currency and quote currency which is second currency which is traded to. There are so many currencies all over the world hence its hard to get exchange for all of them. So they are divided into major pairs (countries which makes the 80% of forex trading globally), minor pairs (frequently traded and traded between currencies which is not US dollars), exotic pairs (trading with emerging economic countries) and regional pairs( separated and traded based on particular regions).
How it works?
Though forex market comprises of different currencies, it is driven by the fact supply and demand and it is necessary to have knowledge about the factors which influence the fluctuations in the market. It is handled by global banks spread across major trading centers at 4 different time zones. Types of forex market are spot forex, forward forex and future forex markets.
Spot forex market is the exchange of currency on the spot physically at the local exchange centers. Forward forex market, within the range of dates, an exchange rate is set and a contract is signed for the exchange. Future forex market is a legally bound contract which is to happen on future date, with specified rate between buyers and sellers.
There are many ways a forex trading can happen, all the ways are same more or less, buying and selling currencies. Usually, it happens via a forex broker, but with the advent of online trading, price movements like ‘contract for difference’ is an added advantage. The major benefit of forex trading is that can go long or short term, market hours are convenient, can trade with a margin, always you have either a buyer or a seller etc.