What is Forex trading

To understand what a Forex trading is, we must for first explain what a Forex is. The term Forex derives from Foreign Exchange Market and is reffered to as Forex or FX or currency market. It is the market for the trading of the currency, and it involves all the buying and selling among the greater international banks. In particular, a great role in Forex is played by the National Central Banks that should have the role to control money supply or inflation.

So the Forex trading represent the trade of the different currencies. Of course, the trade is to be considered among different countries that have different currencies. Let’s see an example: in the great part of Europe, the currency is the Euro, while in England the currency is the Pound. So, if we buy the Euro and in the same time we sell the Pounds, or vice versa, we are are operating a Forex trading.

So simple?

Naturally, it is not so simple because, usually, you can not operate by yourself in the forex trading (www.binary24.de/forex) but you have to do it through a broker or throug a market maker. But what you can do is to select the two currencies you want to work on and when you want to do the trading.

Your order can be very fast, as the broker doesn’t need to go somewhere neither to meet any people or speak about the change of currency: everything is done in a couple of click on some terminal that pass your trade to the Interbank Market. So you can gain or loss money depending on the choice of the currency you trade in. In fact the currencies change their relative value during the days, teh week, the months and the year, so, for example, you can buy the pounds in march and sell them in june to obtain a gain. Let’s see how. Consider that in march you buy 2000 euro: you purchase them in pounds so you will spend about 1600 pounds. If you sell these euros when their value is greater, that means the exchange is advantageous, you can sell the same 2000 euro for the price of 1700 euro, that means that you have gain one hundred euro. But if you work vice versa and buy pounds, you have lost one hundred euro.

So if you trust the wrong booker, you can loose money in this ‘game’. The rise and fall of the prices are not casual, but depends on several economics, financial and politics factors, but also on natural events, such as earthquakes, or floods that a good brooker should understand, but that, as it is easy to imagine, sometimes are not predictable. And probably this is the reason for which the forex trading is considered exciting by a lot of people: the trade market is a risk.

We have said that there are no place where operate, neither person to meet: in fact the forex market has not offices neither a location, but operates on a network of banks and businesses that could grow or reduce everytime. This is one of the most peculiar feature of the forex, while the other one is that it operate twenty four hour a day. In fact, it involves the market of all the world that belong to different time zones: it opens on Monday morning, following the time zone of New Zeland (the first country that see the morning on monday) and it close on Friday following the time zone of New York (the last to see the friday evening).

The Forex trading is connected to a several related terms that are used in the forex language and that are fundamental to better understand the Forex itself. Let’s see some of them.