The forex market, or foreign exchange market, is a global platform for trading national currencies. It operates 24 hours a day, five days a week, and is the largest financial market in the world, with a daily trading volume exceeding $6 trillion.
Forex trading involves buying one currency while simultaneously selling another, which is done in pairs (e.g., EUR/USD, USD/JPY). The first currency in the pair is called the base currency, while the second is the quote currency. The exchange rate reflects how much of the quote currency is needed to purchase one unit of the base currency.
Includes banks, financial institutions, corporations, governments, and individual traders.
Unlike stock markets, which have centralized exchanges, the forex market operates over-the-counter (OTC). This means that trading occurs directly between participants, facilitated by electronic networks and brokers.
Forex trading often involves leverage, allowing traders to control a larger position than their actual investment. While this can amplify profits, it also increases risk significantly, as losses can exceed the initial investment.
FThe forex market is open 24/5 due to its global nature, with trading sessions in major financial centers such as Tokyo, London, and New York. This continuous operation allows for immediate responses to economic news and geopolitical events.
Traders typically use three main types of analysis to make informed decisions:
Involves examining economic indicators, interest rates, and geopolitical events to assess currency value.
Focuses on historical price movements and chart patterns to predict future price behavior.
Gauges the overall mood of market participants, often using indicators like the Commitment of Traders (COT) report.