Forex trading, or FX trading, in simple terms, is the exchange of different currencies or currency pairs. Forex is well-known thanks to being the most liquid financial market in the world. FX trading includes simultaneous purchases and/or sales of the currencies or currency pairs in this market.
FX rates of different currency pairs indicate the exchange rate of one currency for another. Rates play a significant role in trade and business because goods or services purchased from a foreign country must be paid for in the seller’s currency. Total daily average turnover of Forex is above 5 trillion USD. This market is open 5 days a week and 24 hours a day. Large spectrum of currencies are constantly traded as long as people do business internationally and try to benefit from currency fluctuations.
FX market is mainly used by central banks, retail banks and retail traders. Knowledge about their interactions with FX market and their roles within the market will allow you to determine market trends in your fundamental analysis. Central banks manage the currency and interest rates of the country they are located in and retail banks trade large volumes of currency on the interbank market. Retail banks exchange currencies between them on behalf of organizations or for their own benefit.
Corporations working overseas should join the foreign exchange market to transfer funds for imports, exports and other services related to these companies. Compared to the banks, retail traders use a much lower volume of forex transactions when compared to banks. When it comes to currency pairs, determining whether the value of a currency will strengthen or weaken against the other currency is the main goal of FX trading.
Traders face many opportunities due to daily data releases, news, and developments. Traders benefit from these news releases by trading based on the suspected market sentiment.