What Is Forex?


Since we will begin Forex training through this article, we need to know the meaning or definition of the “Forex” word. Forex is simply, an international market where one currency can be exchanged with a different currency. We are trying to illustrate with an example.

Just imagine, you are traveling to another country, the first thing you need to do is find a currency exchange booth at the airport. From there you have to convert your pocket money to that country’s currency.

When you stand at the counter, you will see that there are several different conversion rates on one display. From there you get 100yen with $1. You see that you have $10 more to come out of your pocket filled YEN with happiness. (But your happiness won’t last long if you buy something from a store there).

Notice that you entered the Forex market without knowing what you had done so far. How did you do? Possibly you did not understand! Well, note that you exchanged Yen with Dollar a while back. And if you say it in Forex, then you are an American and you come to Japan, you sell your nearest Dollar and buy YEN. As long as you are in Japan, you will have to exchange Yen for USD, but the rate of exchange will never be fixed. That is, tomorrow you can get higher rates than what you get today or get less.

If the example quoted above is called Forex Trading, then you are an American citizen who has traveled to Japan where you sold yen for dollars.

FX is a short form of Foreign Exchange, the largest financial market in the world. Now the question may be how Big? The world’s largest stock market is the New York Stock Exchange (NYSE), which trades at approximately $22.4 billion per day and the Forex market is trading at an estimated $5.3 trillion daily. Do you understand anything?

The Forex market is the largest foreign exchange market in the world.

The chart above shows the comparison of some of the largest stock markets in the world with the Forex market or the currency market. Yes! You are right, Forex or currency market is about 25 times bigger! The number of dollars you tell us is that the total amount of retail traders (that is, we) trade daily is around 3-5% of the total world, which is about $300-400 billion.

We know you are thinking about the size of the Forex trading market is Huge! Not only its size, but this market is also open for 5 days a week, 24 hours a day. Only weekends (Saturdays and Sundays) are closed. Forex Market does not close or start at any particular time of the day like other stock or bond markets. For example, the time of our stock market (DSE) operates from 10:30 to 14:30. However, the Forex market is automatically transformed from stock trading in one country to another within 24 hours.

For example, the daily forex trading activity starts with Sydney stock and then ends in Tokyo, London, going to the last New York stock market and then moving on to the next day’s Sydney stock. We will discuss these in more detail later. Now we need to know, exactly what kind of trading is done through Forex trading? So, start reading the next article.

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