What is Forex?

What is Forex?

Forex is a commonly used abbreviation for "Foreign Exchange" (forex, FX, or currency market) and it is typically used to describe trading in the foreign exchange market by investors and speculators.

It is a global decentralized market for the trading of currencies. This includes all aspects of buying, selling, and exchanging currencies at current or determined prices. Interms of volume of trading, it is by far the largest market in the world.

For example, Andy imagine a situation where the U.S. dollar is expected to weaken in value relative to the GBP (British Pound). Andy will sell dollars and buy GBP. If the GBP strengthens, the purchasing power to buy dollars will increased. Andy now can buy back more dollars that he had at the beginning, making big profit thru Forex.

The main participants in this market is the larger international banks. Financial centres around the world function as anchors of trading between a wide range of multiple types of buyers and sellers around the clock. The foreign exchange market determines the relative values of different currencies.

A big benefit to forex trading is that you can buy or sell any currency pair, at any time subject to available liquidity. So if you think the Eurozone is going to break apart, you can sell the euro and buy the dollar (sell EUR/USD). If you think the price of gold is going up, based on the patterns you studied, you can buy the Australian dollar and sell the U.S. dollar (buy AUD/USD).

This also mean that there really is no such thing as a "bear market" in the traditional sense. You can either make or lose some money when the market is trending up or down.