Forex, Forex Trading and Currency Trading | Introduction

The foreign exchange market (habitually abbreviated as Forex) is when a currency is exchanged for another. The forex is by far the largest market in the world, in terms of value of transactions, including trades taking place between big banks, central banks, currency speculators, multinational companies, governments and other financial markets and institutions. The exchange activities that take place in the global forex markets aggregate more than 1900 billion dollars a day on average.

How can somebody make money with forex? With the help of a simple PC and an internet connection, nowadays Forex trading has become a lot easier for everyone. Until some decades ago, it was an open market only for few people, to enter and carry out transactions on the foreign currency needed such amount of money that only banks or large institutional investors could have.

Exchange rates fluctuate daily. The value of the dollar may go up or down within few hours. The main areas for trade in foreign currencies are Tokyo, London and New York, but there are also many other areas in which trade takes place. The most heavily traded currencies are: the Australian dollar, the Swiss franc, the English pound, the Japanese yen, the euro and the U.S. dollar. You can exchange any currency for another, and again to exchange the currency bought with another to accumulate money and interest daily.

The stock market is generally based on products, prices and other factors that change the price of the shares. Each currency that is traded in this market is characterized by a code of three letters, to avoid misunderstandings on the currency on which you are investing. The code of the euro is EUR and the U.S. dollar is USD. The British pound is GBP and the Yen JPY.

  • Interest rates, if increased, the currency relative will be appreciated because it means to benefit from high interest rates.
  • The rate of inflation, being obviously linked to interest rates, if rate decrease then there will be a decrease in interest rates and thus a depreciation of that currency.
  • The rate of GDP growth will determine an appreciation of a currency because it means that that country is having economic growth. From that could then result an increase of interest rates.

These and many other key issues affecting the pattern of the quotation currency of a country. If one is able to interpret correctly the information listed above, then there will be an high probability of obtaining good results from forex transactions.

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