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What is Forex trading and how does it work

Published on 17 February 2021 Forex Special bonus

What is the Forex?

Forex means foreign currency exchange; peoples also call FX trading. You will be surprised to know that, in the forex market almost $5 trillion dollars currency exchanging in a single day. The forex market is a global network for buyers and sellers, where they can exchange currencies with each other and they know as traders. They can’t exchange currencies between them directly, they have to buy and sell through the market. The forex market is open 24/5 a week and traders can trade currencies from anywhere in the world.

 

What is forex trading?

Forex trading means exchanging currencies, there are always a pair of currencies is involved in a single trade, like USD/EUR, GBP/USD, EUR/USD, AUD/USD, etc. Every currency has different symbols, which are used to specify currency pairs, like EUR is used for Euro and USD used for United States dollars. If you look at the currency pairs in the forex market, you will see they make a pair like EUR/USD or USD/EUR. The first one is calling the base currency and the other one is calling counter currency. As an example, you want to buy GBP from the pair GBP/USD, so you have to pay 1.3000 against 1 pound (current rate). On the other hand, if you sell 1 pound as your base currency, you will get 1.3000 USD (current rate).

 

Types of Forex Trading

Traders can trade in two ways, one is Demo trading and another one is Live forex trading.

Demo trading is for learning purposes, no investment is required to trade on demo. But the trading way is the same as the live trading. To trade in demo mode, you have to download any forex trading platform like MT4/MT5, Ninja trader, Trader, etc. If you want to become a successful trader, you have to practice demo with a broker account, and education can make you a professional trader.

 

If you want to trade in the live forex market you need a live trading account with a forex broker.

 

Let’s have a simple example of a trade execution: Like a pair EUR/USD, the current selling price is 1.25530, and buying price is 1.25550. As usual, think the Euro price will drop against the dollar. Now you want to sell 5 standard lots at 1.25530.

After 5 minutes, if your prediction will be right and the selling price reached 1.25430 and you closed your trade. So, you will get your profits as your lot size. And, if your prediction will be failed and the selling price will be reached at 1.25550 you will lose your capital as your lot size.

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