What is Forex trading?

By CTA-Algos | 2025-05-07 18:27

Forex trading, also known as foreign exchange trading or currency trading, is the buying and selling of currencies on the forex market with the aim of making a profit. It is one of the most actively traded markets in the world, with an average daily trading volume exceeding $5 trillion. Forex trading operates on the principle of purchasing one currency while simultaneously selling another. This is primarily done in currency pairs - for example, buying the Euro while selling the US Dollar (EUR/USD). Traders speculate on the fluctuating values of currencies, trying to predict whether one currency's value, like the pound sterling, will go up or down in relation to another, such as the US dollar. There are three different types of forex market: Spot, Forward, and Future. The Spot Market is the largest and includes the real asset - in this case, the currency. The Forward and Future markets deal in contracts that represent claims to a certain currency type, a specific price per unit and a future date for settlement. Forex trading can be complex and risky, due to factors such as volatility in the market, leverage and the potential for significant losses. Therefore, it's crucial to gain a solid understanding of forex trading, including how different economic, political and psychological factors can impact the forex market, before getting started.

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