Forex Market Explained (Video)
The Forex market, also known as FX is a decentralized and global market in which currencies are traded. This market was born with the objective of facilitating the monetary flow that is derived from international trade. It is by far the largest financial market in the world, moving a daily volume of transactions of about five trillion US dollars , more than all the other stock markets on the planet combined.
Currency trading can be a little difficult to understand for new traders, but in reality, the transaction itself is very simple. Unlike traditional stock market trading where you buy a position within a company through stocks, forex trading is based on the difference between two international currency values and you get profits by being on the right side of their valuation movements.
In essence, a bet is being placed on a set of currency pairs, hoping that the chosen one will be the one that reaches the highest value. Currency trading is done by comparing these currency pairs, and their gain lies in the movement of one pair versus the other. These movements could be very small and in order to obtain greater profits from these minor movements, you will need to have a higher position than you can have with additional actions.
Also, many currency brokers will offer you a measure of leverage that allows your investment to control a greater number of shares than it actually represents. This leverage allows you to charge a substantial gain product of very small movements in the values of the currencies, in a very short space of time. Most movements in and out of a position has a duration of less than one day in the foreign exchange market as opposed to traditional stocks in which you have to wait months.