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Forex Trading

What is Forex (FX) trading and how is it traded?

Answer ...

Forex is the most commonly used term for the Foreign Exchange Market where all currency trading is conducted. Put simply, Forex trading is used to speculate on the relative strength of one currency against another with the goal of generating a profit. Currencies trade in pairs, for example: EURUSD, USDJPY, USDCHF and GBPUSD.

When you trade currencies, they literally work against each other. If the EURUSD declines, for example, it is because the US dollar gets stronger against the euro and vice versa. So, if you think the EURUSD will decline (that is, that the euro will weaken versus the dollar), you would bet that the EUR is going to fall in value and if it does, you would make a profit.

Major foreign exchange trade is conducted in New York, Tokyo, London, Hong Kong, Singapore, Paris, and Frankfurt. There is no face-to-face trading because all transactions are conducted over the phone and online. For the vast majority of traders, online trading is recommended because of its convenience and low costs. Because there are so many platforms you can trade on, we have section dedicated to helping you find the best Forex platform.

Although exchanges in the US Treasury and the US Stock Market may seem huge, they pale in comparison to the amount of currencies being exchanged through the Forex market. The vast majority of currency trading is driven by speculation. The other main participants in the market are governments and companies who need to convert currencies for their functional needs. Although this makes up a small proportion of overall trading.

Most traders tend to focus on ‘the major’ currency pairs. These include US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar.

Recommended Trading Signals Resource: Alpha Forecast

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