How to trade on Forex?
Forex trading is the constant buying of one currency and selling of another. Currencies are traded through a broker or dealer and are traded in pairs.
“For example, the euro and the U.S. dollar (EUR/USD) or the British pound and the Japanese yen (GBP/JPY).”
When you trade in the forex market, you buy or sell only in currency pairs.
Exchange rates fluctuate based on which currency is stronger at the moment. There are three categories of currency pairs:
1. The “majors“ – These pairs all contain the U.S. dollar (USD) on one side and are the most frequently traded.
2. The “crosses“ – Currency pairs that don’t contain the U.S. dollar (USD) are known as cross-currency pairs or simply as the “crosses
The “exotics“ – Exotic currency pairs are made up of one major currency paired with the currency of an emerging economy, such as Brazil, Mexico, Chile, Turkey, Hungary, and many others.
The forex market is considered an over-the-counter (OTC) market due to the fact that the entire market is run electronically, within a network of banks, continuously over a 24-hour period. This means that the FX market is spread all over the globe with no central location. Trades can take place anywhere as long as you have an Internet connection!
You’ve probably noticed how often we keep mentioning the U.S. dollar (USD). In fact, according to the International Monetary Fund (IMF), the U.S. dollar comprises roughly 62% of the world’s official foreign exchange reserves!