What is Forex market?
One of the first thing you might be interested in is knowing what is Forex market? the Foreign exchange transactions or “Forex” are the exchange of one currency in another currency based on the OTC market price. Forex with an average turnover of $ 5 trillion a day is the largest financial market in the world.
The New York Stock Exchange has a daily turnover of $50 billion, which is very small compared to Forex, so it’s very natural that Forex is the world’s largest financial market.
Basically, trading on the Forex market is buying a currency and selling another currency simultaneously in order to benefit from market fluctuations. The price of currencies increases or decreases relative to each other, depending on factors such as foreign policy and economics. Forex market traders all seek to benefit from these changes. They will continuously predict the future direction of Forex.
What is Forex and Stock market differences?
So after we explained what is forex, it’s time to tell you what is forex and stock market differences. Unlike most financial markets, the Forex market has no physical or central place for trading, and operates 24 hours a day through a global network of businesses, banks and individuals. The prices of currencies are constantly changing with each other, which offers many commercial opportunities.
Trades begin at specific times, starting on Monday morning in Wellington, New Zealand, followed by Tokyo and Singapore, followed by London, and eventually closed at New York on Friday evening. be.
The 24-hour availability of prices for a transaction helps lower the price gap (price fluctuation from one level to another without interconnecting), and traders can trade at any time regardless of time, but in The fact that there are periods of “stagnation” or without activity increases the difference in prices in the market, and this occurs under conditions when the volume of transactions is less than the average daily volume.
All Forex trading instruments are quoted in one currency against another. Each currency pair has a “base currency” and a “cross currency”. The base currency is on the left and the cross currency is on the right side of the currency pair.
For example, in EUR / USD, EUR / EUR base currency and Dollar USD are mutual exchanges. Prices on Forex either rise or fall due to the appreciation of the currency or its decline. For example, if the EUR / USD price falls, this indicates that the cross currency (US dollar) is increasing and the base currency (Euro) is declining.
Since the currencies are exchanged in pairs and in relation to each other, the rate at which they are exchanged is called the “exchange rate”. Most currencies are traded against the US dollar (USD), which has the highest transaction rate among all currencies. After the US dollar, the euro (EUR), the Japanese yen (JPY), the British pound (GBP) and the Swiss franc (CHF) have the highest transaction rates. These five currencies form the majority of the market and are therefore called “major currencies.” Some sources also consider the Australian Dollar (AUD) to be among the major currencies.
When trading in the Forex market, you buy a currency pair in which the base currency will increase the opposite currency. On the other hand, you sell a currency pair in which the base currency reduces the opposite currency.
Some examples of major currency pairs are:
EUR / USD (value 1 Euro in US Dollars)
USD / CHF (value 1 USD to Swiss franc)
Forex prices are responding to a variety of factors, from the trend of international trade and investment to economic and political conditions; therefore, Forex trading is very interesting and exciting. Market liquidity means that prices change quickly with respect to news and short-term events, which creates many trading opportunities for Forex market traders.