What is Forex?

Foreign exchange (Forex, also known as Fx) is the largest and most liquid financial market in the world. It is also a decentralized trading market. Among banks, institutions, investors and individuals, foreign exchange transactions are carried out all the time, on average. Daily trading volume exceeds $5 trillion. Unlike most financial markets, the foreign exchange market has no physical location or central exchange, and trading hours are 24 hours a day, 7 days a week.

Before buying and selling foreign exchange, learn the exchange rate first

The exchange rate is the ratio of one country's currency to another country's currency. It is the price of one currency expressed in another currency. Since the currencies of various countries in the world have different names and currency values, one country's currency must set an exchange rate for the currencies of other countries, that is, the exchange rate. For example: on December 31, 2015, 1 euro was worth 1.05 U.S. dollars, and on November 7, 2016, 1 euro was worth 1.11 U.S. dollars. During that time, the euro's value relative to the U.S. dollar increased by about 5.7%. The exchange rates of some currencies are pegged, such as the Hong Kong dollar against the US dollar, so the investment value of these currencies will be lower.

The so-called foreign exchange transaction usually describes the situation where investors buy one currency and sell another currency at the same time in the foreign exchange market. Simply imagine that the value of the dollar relative to the euro is predicted to fall in the future. In this case, investors would theoretically sell U.S. dollars and buy Euros, and wait until the value of the Euro rises to a certain level before buying U.S. dollars and selling Euros to make profits. This is similar to the principle of investing in stocks. If stock investors believe that the price of the stock will rise in the future, they will buy the stock and sell it when the value rises. The difference is that foreign exchange trading can be conducted in both directions. In addition to buying, you can also sell currency pairs.

The foreign exchange market is affected by many different factors, such as political and economic stability, monetary policy, intervention in foreign exchange, natural disasters (earthquakes, tsunamis...). These factors make Forex trading very interesting and attractive. Highly liquid markets allow prices to change quickly, and the value of a currency fluctuates in response to fluctuations in its supply and demand.