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What is forex market trading and how does it work

Published on 7 March 2021

Forex of FX is also known as Forex Exchange Market trading of Forex Trading. It is one of the world’s largest markets where $5 trillion currency is traded in a day without any centralization! Get more details to succeed in trading and start your trading career. Let’s see what the forex market is, how FX trading works, and how you can start trading.

 

What is forex trading?

Forex Trading is considered now a smart investment. It can be explained as a platform for sellers and buyers. Individuals, banks, companies are the participants of this market where participants exchange currency between each other at the determined or agreed price. The price is not stable, and it changes continuously.

 

What are forex currency pairs?

Forex traders have actually exchanged a currency between another currency. A currency pair is a single unit of 2variouscurrencies, i.e., EUR/USD. The 1st one (EUR) isknown as the base currency, and the 2nd one (USD) is known as the quote currency. In the forex market, currencies are categorized into 3 class:

 

Major currency pairs

The major pairs are the most famous and traded currency in the world. For example:

  • EUR/USD (Euro and US Dollar)
  • GBP/USD (British Pound and US Dollar)
  • JPY/USD(Japanese YenandUS Dollar)
  • CHF/USD (Swiss FrancandUS Dollar)
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Cross currency pairs

The cross pair is referred to as that pair that does not comprisethe USD. The common cross pairs are EUR/JPY, CHF/GBP, EUR/GBP, JPY/GBP.

 

Exotic currency pairs

The exotic pair comprises most traded USD pair with developing country pair such as Brazil, Turkey. These pairs are often traded than major and cross pairs.

 

The most popular exotic pairs are

  • Euro and Turkish Lira - EUR/TRY
  • US Dollar and Hong Kong Dollar - USD/HKD
  • Japanese Yen and Norwegian Krone - JPY/NOK
  • New Zealand Dollar and Singapore Dollar - NZD/SGD
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How does the forex market work?

FX market participants run this market, and it centers in different time zone across the major currencies such as Tokyo, London, New York, Sydney, etc.  Traders can trade in this market 24/5.

 

Forex market work in 3 different ways:

Forex spot market: something real – because of physical exchange of currencies.

Forward forex market: buyer and seller exchange currency at agreed price means a contract.

Future forex market: exchange a specific amount of a specific currency at aconsent price.

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