What is Forex?

Forex (foreign exchange or FX) is, in simple terms, the largest financial market in the world in which individuals, companies and financial institutions can exchange global currencies for one another at changing rates. The forex market is the largest market in the world with an average daily trading volume that exceeds $5 trillion.

The Forex market is a decentralized market, open 24/5 from Sunday night through to Friday night. At any given time, a wide range of currencies are being traded in an attempt to take advantage of rate fluctuations.

What is Forex Trading?

Exchange rates of currencies, are constantly changing. Forex trading allows traders to attempt to earn a profit from the changes and the difference in prices of currencies. Traders can speculate on whether the price of one currency will rise or fall against a different currency, and they take a position accordingly.

For example: Let’s look at the EUR/USD currency pair.

The first currency (EUR) is known as the ‘base currency’, while the second currency (USD) is known as the ‘counter currency’.

For EUR/USD, if you think that the EUR will rise against the USD, you buy the currency pair (go long). However, if you think that the EUR will drop against the USD (or the USD will rise against the EUR), you would sell the currency pair (go short).

Some of the most commonly traded Forex pairs are the EUR/USD, GBP/USD and USD/JPY. These currency pairs are known as ‘majors’. You can also trade minor currencies, known as ‘exotics’. The exotics include currencies like the PLN (Polish zloty), the NOK (Norwegian Krone) and the MXN (Mexican Peso).

Nowadays, you no longer have to leave your house to trade on foreign exchange, and potentially earn money from the fluctuations in prices if your speculation is correct. At Invest505, and thanks to the easy to use technology, traders can now trade CFDs on currencies from their home computer, smartphone or tablet. Choose from a large list of currency pairs to trade on.