Foreign exchange trading in simple words is a network of buyers and sellers. The buyers and sellers transfer currencies amongst each other. Foreign exchange is the medium of converting money from one currency to another. Individuals, banks and companies use it. Majorly foreign exchange is used as a mode for earning profits. The profitability of the transaction is in line with the value of the currency.
If you think that the value of the currency is likely to increase in the future you should buy them. And if there is any indication that the value of the currency will go down that it is advisable to sell them. The variation in the value of the currency determines the profitability of the transaction. The volatility of the market depends on the amount of currency converted. The volatility of the market is the major factor that attracts investors.
What is the base currency and quote currency?
Base currency and quote currency are the two major terminologies used in the foreign exchange market. The base currency is the first currency of the pair while the second currency of the pair is known by the term quote currency. Forex trading means buying of one currency and selling of another. The currencies are coded in the form of three letters. The first two letters stand for the region while the last letter denotes the currency.
What is the driving force behind the forex market?
The forex market is the largest trading market where currencies from across the world are traded. Due to the involvement of a huge number of currencies the prediction of the exchange rate becomes difficult. Various factors affect the movement of the forex market. But, the major driving force of the forex market is the demand and supply ratio. In order to make successful trade you need to understand the driving forces of the forex market. One of the best forex trader Siby Varghese has mastered the study of the driving forces of the currency market.
How does forex market work?
Forex trading market is different from the stock market. The foreign exchange trading takes place over-the-counter market, i.e., OTC market. It is a decentralized market hence, it works continuously. In short you can trade 24 hours of the day in currency market. Thus making it the most active trading platform across the world.