Forex market (from English FOReign EXchange – currency exchange) – the international interbank currency exchange market, which replaced the Bretton Woods monetary system in 1976, where quotations are formed without any restrictions on anyone’s side. The daily turnover in Forex is several trillion dollars.
Most often, the term Forex Market is separately used to denote a completed currency exchange transaction, and not the entire set of transactions that occur in the market.
What is the essence of the Forex market?
The Forex market is based on the principle free exchange of currencies, which implies the absence of government intervention in the conclusion of transactions (there is no official exchange rate, there are no restrictions on the direction, prices and volumes of transactions).
This is its main and most attractive difference from the stock markets. At the same time, there are still certain rules for the provision of intermediary services, which is a relationship between a client (trader) and an intermediary (broker).
At present, all Forex transactions are carried out through central, commercial and investment banks, broker and dealer companies, pension funds, insurance companies, and other financial institutions.
What currencies are traded on the Forex market?
The main currency of the Forex market is the US dollar (USD). The main currency pairs in the foreign exchange market are considered to be the pairs of the American dollar with the euro (EUR USD), the pound sterling (GBP USD), the Japanese yen (USD JPY) and the Swiss franc (USD CHF). Most other world currencies are also traded against the US dollar, however, cross rates are also very popular on Forex, that is, currency pairs that do not use the US dollar.
Additionally, the Forex market provides an opportunity to trade gold, silver, oil and other assets, whose value is expressed in dollars.
What is the exchange rate or currency quotes in the Forex market?
The exchange rate or quotes of a currency in the Forex market is the value of one currency, expressed in units of another. Since the main currency in Forex is the US dollar, the value of other currencies is expressed in US dollars.
What are currency pairs in the foreign exchange market?
A currency pair is the main instrument of the Forex market and is a currency quote expressed in bank currency denominations. In this case, the base currency is in the first place (left), the quote currency is in the second place (right).
For example, the euro / dollar currency pair on Forex is designated EUR / USD, that is, the value of the euro (the traded currency) is expressed in US dollars (the quote currency). In other words, the current quotation of the EUR / USD currency pair on Forex 1.1143 means that at a given time in the foreign exchange market, the cost of 1 euro is 1 dollar and 11.43 cents.
How to start trading Forex?
The ability to trade on the Forex market is provided by forex brokers, dealing centers and commercial banks. Forex trading is carried out through the client terminal of the selected company. At the moment, the most popular trading platforms are MetaTrader 4 and MetaTrader 5. Forex is based on margin trading (using collateral).
Learn more about the Forex market