08:21
MarocTique
? What is FOREX
The foreign exchange market, also known as the Forex or FX market, is by far the largest financial market in the world. To put things in perspective, it is more than 50 times larger than the New York Stock Exchange, with a daily turnover of more than $4 trillion.
What is traded?
The answer is money.
It is exchanged among large central banks and organizations, investment companies and individual traders.
Actually, you have probably participated in Forex trading without even knowing it. Every time you take a trip to another county and exchange money, you contribute to that $4 trillion daily trade volume.
If taking a trip to the US, you would convert your base currency into US dollars. This effectively means that you would be buying dollars and, basically, a share in the US economy.
| Symbol | Country | Currency |
| USD ($) | United States | Dollar |
| EUR (€) | Eurozone members | Euro |
| JPY (¥) | Japan | Yen |
| GBP (£) | Great Britain | Pound |
| CHF | Switzerland | Franc |
| AUD | Australia | Dollar |
| NZD | New Zealand | Dollar |
How is Forex traded?
Forex exchange traders would typically look at the currencies available and buy the strongest currency while selling the weakest. So, for example, if after reading the news, you thought the euro was strong and the US dollar was weak, you could buy the euro while selling the dollar.
Because you are comparing one currency to another, Forex is always quoted in pairs. Therefore, an example of a EUR/USD quote would be 1.4650. This means that one euro is worth 1.4650 US dollars at that moment in time. If this rate fell to 1.4422, then this would mean the euro is getting weaker and the US dollar is getting stronger.
Within a Forex pair, the first currency is referred to as the base currency and the second currency is referred to as the quote currency. When you buy or sell a currency pair, you are performing an action on the base currency.
The US dollar is by far the most traded currency in the world – with almost 85% of all reported transactions. The euro comes next, followed by the yen, and then the pound. For this reason the rates of all currencies against the dollar are referred to as major rates (USD/JPY) and the rest are cross rates (e.g. EUR/JPY).
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