The foreign exchange market is the "place" where currencies are traded.
Currencies are
important to most people around the world, whether they realize it or not. This
industry
used to be the exclusive business of the banks where they make millions of
dollars by
just exchanging the currencies of different countries.
This market determines foreign exchange rates for every currency.
It includes all aspects of buying, selling and exchanging currencies at current
or determined prices.
History
Before the Internet revolution only large players such as international banks,
hedge funds and
extremely wealthy individuals could participate. Now retail traders can buy,
sell and speculate on currencies from the comfort of their homes with a mouse
click through online brokerage accounts.
Three Ways to Trade Forex
Similar to stock trading, forex traders are attempting to buy currencies whose
values they think will
increase relative to other currencies or to get rid of currencies whose
purchasing power they anticipate will decrease.
- The spot market.
- The forward market.
- The futures market.
The exchange rates in these markets are based on what’s happening in the spot market,
which is the largest of the forex markets and is where a majority of forex trades are
executed.
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