What is Forex?

Forex (also abbreviated as FX) stands for Foreign Exchange, and in simplest terms it’s the market where foreign currencies are traded. With an average daily trading volume of over $4 trillion, the forex market is the largest financial market in the world, dwarfing the stock market in sheer size and liquidity. This makes forex trading an attractive option for all traders, and provides great advantages and opportunities for the active trader compared to other markets.

Forex Explained

The history of the forex market goes back to the currency swap that was originally available only to high net worth individuals, banks, and large commercial entities. With increased openness and the surge of retail brokers, it is now possible for everyone to participate in the forex market. The huge popularity and increased volume has given traders of all levels and spending power the opportunity to buy and sell currency at any time in order to gain a profit.

The forex market is open globally for trading 24 hours a day, 5 days a week (Monday to Friday) overlapping with the major financial centers of the world, and as such the forex market can be very active at any time of day. This provides the flexibility to initiate trades at your own convenience, wherever in the world you are. Coupled with no trading restrictions or limits, you can trade as little or as much as you’d like, and respond quickly to any changing market conditions.

Unlike most other financial markets, the forex market is decentralised and has no physical location. Trading with Equiti is conducted on an execution only basis in over the counter (OTC) derivative products through an interbank network. A retail execution only margined forex broker such as Equiti facilitates this connection and quotes the currency prices available to it at the moment. A retail execution only broker also does not provide advice but does provide the trader with a trading platform, market analysis tools, education and financial facilities, which may allow you to trade with much higher capital than your initial deposit.

Trading Forex

The concept of trading on the forex market is simple, it involves the simultaneous buying and selling of currency in pairs, with the expectation of one rising or falling against the other. The most popular traded pair is USD/EUR, although other major and minor currencies are available as well. Given the forex markets high traded volumes and factors such as economics and geopolitics, currency prices are constantly fluctuating in value against each other, offering multiple trading opportunities.

There is always opportunity to trade during the market’s volatility periods, even though the market is falling down, you can earn a profit by selling your positions. By paying attention to the markets, global trends and economic calendars, you increase your chances of making more informed and better trades. While the advantages of the forex market are many and there is potential for reward, trading also entails risk, so we suggest that you learn more about the ins and outs of margined forex by reading our Education section.


Ready to make your first trade? Open an account with Equiti or test your skills with a free demo account, which can help you learn margined forex trading hands-on before you move on to the real thing.

 

About the author

The author is an expert in the field of multi-asset trading.