The foreign exchange markets also known as the forex markets is the biggest financial market, globally. The prime participants in the global foreign exchange markets include institutional investors, large banks and with recent technological advancements, this market has become accessible to small retail investors. This market offers the forex trader to earn money. All that the trader needs to carry is a brokerage account that can be opened online, a computer that has internet connectivity.
Different Types of Currencies in the Forex Market
The forex market is a place where traders trade the different world currencies. The following eight currencies are immensely popular in the global currency markets:-
U.S. dollar (USD)
The British pound (GBP)
Swiss franc (CHF)
New Zealand dollar (NZD)
The Australian dollar (AUD)
Canadian dollar (CAD)
Japanese yen (JPY)
How Forex Trading Works?
The different currencies that are traded in the forex market are all from developed nations. This is because that these currencies make the highest share in the global forex trade. The traders in the foreign markets buy a currency when its value is less and they sell the same currency when it prices go up. In this process, the currency traders make a profit. In forex trade, the currency quoting is done in pairs. The quote EUR/USD is 1.20 implies that 1 Euro buys 1.20 USD. When the quote becomes EUR/USD is 1.30 then it implies that the Euro has become stronger than the dollar. The objective of the currency trader is to anticipate the rise or fall of the currency value so as to buy or sell that currency.
The currency pairs do not fluctuate much. However, there can be exceptions in this regard. If you are a forex trader and decides to buy or sell currencies online then it takes very little time to accomplish the transaction. Currency trading can promise a good return on investments but at the same time with forex trading, the risks of high losses increases.