Forex is a market where the values of countries’ currencies are determined among the banks. Forex is an abbreviation for Foreign Exchange. It is not an agency or institute and it doesn’t have headquarters. Forex is the name of the market. Transactions are executed as a spot in the market among the banks.
In Forex, people trade the value of the currencies against each other. While you are buying a currency, you sell another currency at the same time.
Forex is a high volume and best-attended buying and selling market in the world. It is a big market with the trading size of 5 trillion USD per day. That means there is more liquidity, not only more than Wall Street, but also more than the stock markets all around the world. That’s why it is not really possible to see speculative moves in this market. This means an investor can’t change the prices as he wants by buying and selling with his personal and institutional power. Buying and selling prices increase or decrease according to supply and demands. It is a basic balance. It is no different from any other goods. If there are a lot of takers for some goods, the price increases. If there aren’t a lot of takers, the price is dragged down to sell more. This is a basic principle of liberal trade. Naturally, parities you transact move on this principle.
In the Forex market, 7 basic currencies are dealt with the most. They are respectively:
USD – US Dollar
EUR – Euro
JPY – Japanese Yen
GBP – British Pound
CHF – Swiss Franc
CAD – Canadian Dollar
AUD – Australian Dollar
These currencies are named as the “Major Currency” in Forex language. All other currencies except for these are named as the “Minor Currency”. NZD – South African Rand and SGD – Singapore Dollar are some good examples of these currencies.
Forex’s most basic advantage is leverage. Leverage is an authorization that can allow you to transact up to a certain level of the stock that you have. For example; you have 1000 USD in your account and the leverage declared to your account is 1:100. In this case, you can invest 100,000 USD that is 100 times more than your 1000 USD balance and you can make a profit through this amount. Your deposit is used as the warrant to let you execute major buying and selling and this way, you can have a chance to make big profits with your limited stocks by creating big positions.
Forex’s second-biggest characteristic is to give you an authorization also for selling. In the share market, finding and buying demerit good stocks and waiting for their value to increase underlie the basis of trade. In Forex transact platforms; there are the BUY and the SELL buttons. If you wait for the price to increase, you press the BUY button. If you wait for the price to decrease, you press the SELL button. Thereby, you have an opportunity to make a profit from a decrease, unlike other markets.
Forex market’s third-biggest characteristic is that you can make transactions 24 hours a day, 5 days a week. Your transaction platform is at your service for 24 hours. Of course, this is a big opportunity. It is a big advantage to know that the market is on and ready for your service.
We have sorted the important characteristics of Forex however, there are many more. We hope you will have more information when you check our website.