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What is Forex market?
Forex trading or simply Forex is a process in which one currency is exchanged with the other
one due to many different reasons, related to trading, commerce, or tourism. Forex markets are
the largest ones in the world because of the global reach.
But how does it work?
Unlike other financial markets, such as the stock market or specific commodity markets,
currencies are not traded on a central exchange. Instead, it’s a highly decentralized market,
which allows a huge number and variety of people to access it, to buy currencies or swap one
currency against another. This is why currencies are of great importance. The market works 24
hours 5 days a week. Participants trade not in one huge platform but rather through electronic
communication networks (ECNs) or phone networks in different markets across the globe.
The currencies are always traded in pairs and these are always written in a certain way. For
example, if you’re trading British pounds against US dollars, you would write GBP/USD.
The performances of the economies that relate to each currency affect the values of
currencies. The intervention of central banks in response to inflation, deflation or a sluggish
economy also affects these currencies. Forex traders stay glued to economic reports like the CPI
(Consumer Price Index) and hints of what the central banks will do about the interest rates.
