marché du forex

Forex: Understand everything about Forex trading and its market on the international scene

For those who are not yet familiar with Forex, know that under this name straight from Wallstreet, hides the abbreviation of Foreign exchange, which means the exchange of currencies on a decentralized global market.

It is currently one of the most important financial markets in the world. Trading on the Forex market, however, requires solid knowledge because it involves the purchase and sale of numerous currencies from all over the world.

Exchange rates between different currency pairs indicate the rates at which one currency will be exchanged for another. It plays a vital role in trade and foreign affairs because products or services purchased in a foreign country must be paid for in that country’s currency.

The possible gains from Forex trading are great, but the risks are not less. The success of each investment is based on the exchange rate between X number of currency pairs and it is by this same principle that international trade between foreign countries is governed.

The definition of Forex in a few words

Having become one of the main trading markets across the world, Forex represents a volume of approximately 5 trillion dollars every day. Forex is a decentralized market, meaning that its activity is not based on a specific physical location and that it is a 24-hour market open from Sunday to Friday. Exchanges are based on a wide range of currencies and vary at the rate of investments made by individuals and organizations trying to optimize their investment by betting on the fluctuation of exchange rates.

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Understand how Forex trading works

Forex trading is a special market. You should not choose to invest in a particular currency but in a pair of currencies. For example, the EUR/USD pair (Euro and US dollar). You will then speculate on the principle that the price of a country’s currency will increase or decrease its value against its opposite and opt for a position accordingly of your choice.

In the jargon, when you choose to speculate on a currency pair, in this case EUR/USD as we did for our example, the first currency (here EUR) is called the “base currency”, the second (USD) is called “against currency”.

As you can see, the principle itself is very simple to understand but, however, to be able to make profits in line with your investment, a solid knowledge of the international currency market is essential. If this is not your case but you nevertheless wish to invest in Forex, we strongly advise you to call on a trader specialized in this field, see the best forex broker if you have the opportunity and means.

What events can influence the Forex market?

As you will have understood, Forex is a very volatile market which is based on the principle of variations in the exchange rate between currencies. Unlike other more stable markets based on the success of businesses, the value of currencies can be influenced by many external factors, namely (and this list is far from exhaustive)

  • Political events
  • Natural disasters
  • Various economic factors

Investing in Forex therefore requires constant monitoring of the international scene and various geopolitical issues.