What is Forex & How Does It Work?
 

Forex, also known as foreign exchange, FX or currency trading, is a decentralized global market where all the world's currencies trade. The forex market is the largest, most liquid market in the world with an average daily trading volume exceeding $5 trillion.

All the world's combined stock markets don't even come close to this. But what does that mean to you? Take a closer look at forex trading and you may find some exciting trading opportunities unavailable with other investments.

What is the Forex Market?

If you've ever traveled overseas, you've made a forex transaction. Take a trip to France and you convert your pounds into euros. When you do this, the forex exchange rate between the two currencies—based on supply and demand—determines how many euros you get for your pounds. And the exchange rate fluctuates continuously.

A single pound on Monday could get you 1.19 euros. On Tuesday, 1.20 euros. This tiny change may not seem like a big deal. But think of it on a bigger scale. A large international company may need to pay overseas employees. Imagine what that could do to the bottom line if, like in the example above, simply exchanging one currency for another costs you more depending on when you do it? These few pennies add up quickly. In both cases, you—as a traveler or a business owner—may want to hold your money until the forex exchange rate is more favorable.

There are several key differences between swapping currencies abroad and buying or selling forex.

• The first is convenience. The forex market is a decentralised, electronic exchange. Accordingly, participants are able to trade currencies from anywhere, anytime the market is open.
• The second is efficiency. Forex traders enjoy the utmost in liquidy, which promotes tight spreads, regular volatilities and rock-bottom pricing.

Participating in the foreign exchange market is the easiest, most efficient way of exchanging currencies. You don't have to stand in line at a currency dealer and pay undue premiums to trade monies. Instead, you simply need computing power, internet connectivity and an FX broker to engage the world's currency markets.

It will be very difficult if not impossible to describe Forex market in just one article. You will need to go through dozens of articles to have an idea how everything works on this financial market. And the next step is to read about brokers blacklist, https://tradersunion.com/brokers-blacklist/forex/. It is important not to make a wrong choice when selecting an intermediary to online trading.