What is Forex ???

You may have now started trading, won some pips, lost more pips. Let's get a bit of refreshment.

What is Forex Trading?

Forex or Foreign Exchange is the simultaneous buying of one currency and selling of another.

The Forex Market has more buyers and sellers and daily volume than any other market in the world and takes place in major financial institutions across the globe. The forex market is open 24 hours a day five days a week.

Buying/Selling

In the forex market, currencies are always priced in pairs and all trades result in the simultaneous buying of one currency and the selling of another. The objective trading is to buy the currency that increase in value relative to the one you sold. If you have bought a currency and the price appreciates in value, then you must sell the currency back in order to lock in the profit.

Quoting Conventions

Currencies are qouted in pairs. The first listed currency is known as the base currency and the second is called the counter or qoute currency.

Currencies are quoted using five significant numbers, with the last placeholder called a pip

For example a EUR/USD quote 1.4112/1.4114

Like all financial products, forex quotes include a 'Bid' and 'Ask or a 'sell' and 'buy' price.
By quoting both the bid and ask in real time, brokers ensure that traders always receive a fair price on all transactions. As in any traded instrument, there is an immediate cost in establishing a position. This cost will vary between the different brokers and is sometimes called 'spread'.

For example, USD/JPY may bid at 114.91 and ask at 114.94, this 4 pip spread defines the trader's cost, which can be recovered with a favourable currency move in the market.