Trade 4US Daily

FOREX Trading

Forex Trading

The foreign exchange market, also known as 'FOREX', is a global decentralized or over-the-counter market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all aspects of buying, selling and exchanging currencies at current or determined price. Learn More

What is FOREX Trading?

Forex trading is the means through which one currency is changed into another. When trading forex, you are always trading a currency pair – selling one currency while simultaneously buying another. Each currency in the pair is listed as a three-letter code, which tends to be formed of two letters that stand for the region, and one standing for the currency itself. For example, USD stands for the US dollar and JPY for the Japanese yen. In the USD/JPY pair, you are buying the US dollar by selling the Japanese yen. Some of the most frequently traded FX pairs are the euro versus the US dollar (EUR/USD), the British pound against the euro (GBP/EUR), and the British pound versus the US dollar (GBP/USD).

Three Ways to Trade Forex?

Most forex trades aren’t made for the purpose of exchanging currencies (as you might at a currency exchange while traveling) but rather to speculate about future price movements, much like you would with stock trading. Similar to stock traders, forex traders are attempting to buy currencies whose values they think will increase relative to other currencies or to get rid of currencies whose purchasing power they anticipate will decrease. There are three different ways to trade forex, which will accommodate traders with varying goals:

  • The spot market. This is the primary forex market where those currency pairs are swapped and exchange rates are determined in real-time, based on supply and demand.
  • The forward market. Instead of executing a trade now, forex traders can also enter into a binding (private) contract with another trader and lock in an exchange rate for an agreed upon amount of currency on a future date.
  • The futures market. Similarly, traders can opt for a standardized contract to buy or sell a predetermined amount of a currency at a specific exchange rate at a date in the future. This is done on an exchange rather than privately, like the forwards market.

    • The forward and futures markets are primarily used by forex traders who want to speculate or hedge against future price changes in a currency. The exchange rates in these markets are based on what’s happening in the spot market, which is the largest of the forex markets and is where a majority of forex trades are executed.

    Would you like to learn how to become a profitable trader? Join our trading channel.

    Coded by Chavonne Jacobs